Fed on hold, ECB and BoE up next

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 London time. 

FX option expiries will be 14.00 London time, not the usual 15.00 London time.

This will be until Sunday 29^th March when we change our clocks in the UK.

The Fed did keep rates unchanged yesterday, no great surprise that Miran voted for a 25bps cut but all other members voted for no change.  Powell said that the economy was performing well and current policy was appropriate, although the Middle East crisis brought plenty of uncertainty.  He said that rising energy prices would push up inflation but added that even without events in the Middle East the Fed haven’t seen as much progress on inflation as they’d have hoped. 

Longer term rate expectations ticked a little higher to 3.1% from 3% and although shorter-term rate forecasts did drop a touch, overall the meeting was regarded as reasonably hawkish.  USD pushed higher and equities dropped, moves exacerbated by reports of attacks on various oil and energy facilities in Iran as well as Qatar, with further attacks likely.  Oil prices have risen and the chances of any sort of negotiated peace seems to be diminishing, with reports now that UAE and some other Gulf nations are looking at a regime change in Iran as the only solution.  There is a suggestion that US will send thousands of troops to the Middle East in case the military action escalates.  There are some thinking that we will see a supply shock that will push oil sharply higher, likening the fall in supply as simi9lar to the fall in demand during the Covid lockdowns. 

UK employment numbers this morning were actually a touch better than feared, with a lower change in claimants than expected and the unemployment rate holding at 5.2% when a tick higher had been expected.  However, pay growth is slower than expected which brought a mildly dovish tone to the data.  GBP dipped a little but the impact has been limited, GBPUSD now 1.3250, yes that’s over 100 pips lower than yesterday’s levels but the bulk of that move came after the Fed rate meeting.  GBPEUR is 1.1575 with EURUSD 1.1450.

Elsewhere, headline Aussie jobs data looked decent enough with a larger than expected rise in employment numbers but on closer inspection the rise came from a lift in part-time work, offsetting a drop in full-time employment.  The unemployment rate ticked higher to 4.3%.  AUD is actually broadly unchanged with AUDUSD 0.7030, AUDNZD 1.2110 and GBPAUD 1.8835.  Meanwhile, NZ GDP was softer overnight with revisions also to previous numbers.  NZD weakened on the release with GBPNZD and AUDNZD pushing higher but NZD has since recovered those losses.

UYSDJPY has pushed up to 159.90 after the Fed rate announcement BoJ kept their rates unchanged at 0.75% overnight, marking a new high since July 2024 but slipped back this morning to 159.05, now 159.30.  The bout of yen strength could be put down to strong words from Japan FinMin Katayama who said recent currency moves have brought a high sense of urgency and that Japan can and will respond to moves at any time. 

I do have to mention Spurs yesterday who did fail to reach the Champions League quarter finals but did manage to beat Atletico Madrid 3-2 in a display of energy and desire that Spurts fans have not seen for a long time.  If this can continue into the domestic league then Sours should be safe from relegation.   Newcastle were hammered 7-2 by Barcelona putting them out of the tournament, leaving just Arsenal and Liverpool as the only two English clubs to proceed to the quarter finals despite six teams making the last sixteen.  Notts Forest, Aston Villa and Crystal Palace all in European action this evening. 

Today brings BoE and ECB rate meetings.  No change expected at either, with the accompanying script likely to read something like ‘Middle East creating uncertainty, inflation higher than we’d like with upside risks, as such rates stay on hold’.  If so, they should come and go with little fuss.

Have a great day…

-  08.30 SNB rate announcement

-  12.00 BoE rate announcement

-  12.30 US initial jobless claims, philly fed manufacturing survey

-  13.15 ECB rate announcement

-  13.45 ECB press conference

-  14.00 US new home sales

-  21.45 NZ trade balance

-  01.15 PBoC rate announcement