Currencies take a breather

Good morning

Currency markets were pretty quiet but bonds have been sold off, sending yields higher with the US10 year yield now at 1.95%, the sort of area we were at in Nov 2019 before Covid was really even a thing.

ECBs Lagarde may have pushed back very slightly on early rate rises, saying that inflation should hold around target and there was no need to rush and that rate rises would not take place before net asset purchases finish, but market impact was limited and it wasn’t until this morning that EURUSD broke briefly below 1.1400. Lets see what Villeroy has to say later in the day.

GBPUSD is holding above 1.3500, currently 1.3540 which has been the top of the range since yesterday morning and tested a few times overnight. GBP a little better off against the EUR, EURGBP backing off from its highs around 0.8475 (1.1800) yesterday to trade 0.8425 (1.1870) as I type.

Meanwhile the rest of the world continue to try to find a diplomatic solution to the Ukraine/Russia crisis, although the UK among others has made it clear they may send further troops to certain European countries to support NATO, with UK PM Johnson talking of the largest troop build-up in Europe since the cold war. Dangerous stuff. However France have said that Putin is looking to de-escalate the crisis, lets hope that’s true although I see Biden has made it clear the Nord Stream 2 pipeline would be stopped if Russia did invade Ukraine.

Elsewhere, US and Japan have reportedly reached a deal to remove tariffs on steel that have been in place since Trump. An ex-RBA official has suggested RBA could raise rates four times through 2022, AUD not particularly moved despite some moves in the Aussie bond markets.

Looking ahead, its not the busiest calendar so it may be a good chance to catch up on some admin. I’ve tried to get into the winter Olympics, i can watch a few minutes of most sports but do struggle to get too involved. I have to say though I am always amazed at what people can do with their bodies. I was watching some ice-skating yesterday and I am baffled as to how anyone can spin round on the spot so fast and for so long and then be able to skate away as if nothing had happened. I always think they need to get a ‘normal’ person to try the same things, only then will it be very apparent just how special these competitors are. Doesn’t mean I’m glued to it though. I do quite like the skiing/shooting, and the bobsleigh. If I’m not mistaken, Jamaica are making an appearance. They should make a film about that…..

- 13.30 US goods trade balance

- 13.30 CAD trade balance

- 17.00 ECBs Villeroy speaks

- 23.30 AUS Westpac consumer confidence

- 02.00 NZ RBNZ inflation expectations