Central banks dominate headlines
GBP did have a wobble yesterday ahead of the budget but has stabilised, GBPUSD now at 1.3770 and EURGBP back to 0.8430 (GBPEUR 1.1860), as OBR warns CPI could reach 5.4%. GBP shrugs off French threats to disrupt trade and even mess with energy supplies over the fishing dispute. No major news from the budget, particularly as the majority seemed to have been leaked a day or two earlier.
BoC were a little more hawkish than many expected when they ended QE and brought forward timing of rate rises. USDCAD traded sharply lower, from 1.2430 to almost 1.2300, although CAD has since given back half of those gains, now 1.2370.
BoJ kept policy unchanged, warning that the economy is still in a poor state but in a good place to recover if Covid lets up. JPY did strengthen a little after the announcement, USDJPY trading 20 pips or so lower but at 113.60 amd EURJPY pushing below 132.00.
A bit of excitement in Aussie bonds overnight as RBA chose not to defend its 0.1% yield target, sending April 2024 bonds to over 0.5%. There is a big difference in RBAs rate rise projections and current market thinking. RBAs Lowe has suggested no rate rises until 2024 but the market is pricing rises in 2022 and 2023. AUD relatively stable during this bond market volatility but next week we have an RBA rate meeting and I’m expecting to see some volatility approaching that.
Brazil central bank raised rates 1.5% to 7.75% and signalled further rate rises to come, with a target rate of possibly 10%. USDBRL at 5.5350, off last weeks highs of around 5.75, it will now be interesting to see if the prospects of higher and higher rates will contain further BRL weakness or not.
ECB rate meeting later today and it is thought Lagarde will try to continue to offer a dovish viewpoint. Euro has been struggling recently as market looks for rate rises in other countries, US and UK for example, but less so from ECB. I doubt there will be much today to change this view, we’ll see if Lagarde mentions anything on inflation concerns. EURUSD currently 1.1610.
I’ve added in a calendar for Friday as I will be away later today and tomorrow. There are quite a lot of high-level economic releases to watch tomorrow.
The clocks change this weekend, so we can look forward to an hours more sleep. We have no fixture for my team on Sunday so I get even more of a lie-in. Well, either that or I just have more time to do many of the chores that I seem to have avoided recently.
- 09.00 German unemployment
- 10.00 EU confidence data
- 12.45 ECB rate announcement
- 13.00 German CPI, HICP
- 13.30 ECB press conference
- 13.30 US GDP, PCE, initial jobless claims
- 15.00 US pending home sales
- 00.30 Japan unemployment, Tokyo CPI, industrial production
- 01.30 AUS retail sales
- 09.00 German GDP
- 10.00 EU GDP, CPI
- 13.30 US Core PCE, personal income, spending
- 13.30 CAD GDP
- 14.45 US Chicago PMI
- 15.00 US Michigan sentiment survey
- 20.30 CFTC position data