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  • richard evans

Forget pausing, RBNZ raise rates 50bps

Good morning

A much stronger set of S&P PMI numbers out of the UK gave GBP a hefty boost yesterday morning, GBPUSD traded up from 1.2000 to almost 1.2150 through the day and made gains in most crosses, GBPAUD has gained 300 pips since yesterday morning, now 1.7735, GBPZAR now 22.20, levels not seen since August 2020.

With EURUSD stuck in the mid-1.06s, GBP also made gains against the single currency, reaching 1.1380. GBP has since slipped back from those highs, as I type we have GBPEUR 1.1345 and GBPUSD 1.2080 but this serves as a reminder that economic data can still have a decent impact on the currency markets.

I had thought RBNZ could look to pause rate rises after the recent cyclone, they proved me very wrong indeed as they instead raised rates by 50bps overnight. NZD did push higher as you’d expect, GBPNZD dropped around 100 points to 1.9420 and has held onto those gains, AUDNZD also fell from mid-1.10s to mid-1.09s. NZ rates now 4.75%, RBNZ still see rates as high as 5.5%

Putin offered no signs of peace or reconciliation in his speech yesterday, taking a very hard line and blaming the west for the invasion of Ukraine, speaking a lot about the potential for NATO and its allies to attack Russia. Seriously? Does he really think we were on the verge of attacking Russia? Do the Russia public really believe that? Anyway it certainly has the potential to turn into a real East v West battle, with the West arming Ukraine and talk that China may help out with weaponry for Russia. I don’t like the way this is going and neither do the markets, with equities firmly in the red yesterday.

I am reading with interest that we may see rations for some vegetables, indeed Asda and Morrisons are already restricting the purchase of some products, with Asda only allowing each customer a maximum of three items such as cucumbers, cauliflowers and broccoli and Morrisons only allowing each customer a maximum of two cucumbers lettuce and peppers. Bad weather in food producing countries is apparently to blame, along with the high energy costs involved in producing these items domestically.

FOMC minutes will be out this evening, we will be watching to see how many members voted for a 50bps rise at the last meeting. We believe Mester and Bullard both wanted a 50bps rise, if there were more on their side then we could see USD push higher.

I’m out of the office later today so there will no report Thursday morning. I have added the calendar for Thursday, US GDP is likely to be the highlight.

- 09.00 German IFO

- 19.00 FOMC minutes

- 05.15 RBAs Bullock speaks


- 09.30 BoEs Mann speaks

- 10.00 EU HICP, CPI

- 10.45 BoEs Cunliffe speaks

- 13.30 US GDP, Core PCE, initial jobless claims

- 23.30 Japan CPI

- 00.01 UK GfK consumer confidence

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