• richard evans

Divergence in US/China rates

Good morning


US dollar at last made back a little of its recent losses Friday, rate rise expectations driving the move with some talk Fed may need to raise more than four times this year in order to combat inflation. Some also talk of a rise of 50bps when Fed do start pushing rates later this year. There is a Fed meeting next week, no changes expected for now and Fed officials are in the blackout period where they cannot talk to the press. Will be interesting to see what is discussed at that meeting mind you.


While Fed are looking at rate rises, China have just cut its key one year policy interest rate by 10bps to 2.85%, the first cut since April 2020, although this had very little impact on currency markets. China growth is slowing with Q4 coming in at 4% compared with 4.9% in Q3, and retail sales were sharply lower than expected. figures PBoC DepGov Guiping has warned that some industries are moving from China to Southeast Asia and back to other developed countries, partly as a result of Covid but also on geopolitical grounds. Also news that China saw the lowest population growth in 2021 in modern history. Their zero policy on Covid looks likely to fail, as I have said before I reckon they’ll keep it until after the winter Olympics and then have to change policy.


US have warned that Russia are looking to create false reasons for an invasion of Ukraine, while Ukraine was hit by a huge cyber attack with fingers of course pointing to Moscow. One of Putins aides has said is it disturbing that US and Russia are so far away on an agreement but there is no sign of Russia looking to de-escalate the crisis. In fact to make matters worse, Sw2eden have seen fit to send troops to one its islands, Gotland, after an increase in Russia military activity in the region.


Some incredible satellite footage emerged from the underwater volcano eruption that hit Tonga over the weekend. The images from space are impressive and seem to show a sizeable shockwave travelling thousands of miles, although we must remember that the impact on Tonga is likely to be pretty devastating.


A disappointing weekend of sport, with Englands cricket team managing yet another collapse just when they looked as though they might have a chance of victory. Arsenal somehow got the derby against Spurs called off which seems to make a mockery of the Premier Leagues covid-based leniency regarding unavailable players. Not singling them out, they are certainly not the only ones, but the rules do need to be looked at closely otherwise we will continue to see teams choosing to miss matches at their convenience.


More disappointing was that my U15s cup match was postponed for the second week running, our opposition not having a suitable pitch. It was called off too late for me to be able to arrange another match, so we sat this week out. The fixture will instead be played next weekend at our place so should go ahead unless we have severe weather, but we’ve now missed two weeks of matches and our fixtures are already piling up.


A holiday in US today, Martin Luther King day, and the dollar already seems to be giving up a bit of ground. As I type GBPUSD is 1.3675, EURUSD 1.1430 and EURGBP 0.83630 (GBPEUR 1.1960).


- 11.00 German Buba monthly report

- 13.30 CAD manufacturing sales

- 15.30 CAD BoC business outlook survey

- 03.00 BoJ rate announcement

- 06.00 BoJ press conference

- 07.00 UK unemployment


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