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Kiwi flies as ANZ research look for further rate rises

Good morning


Central bankers did indeed pretty much follow the same script yesterday, certainly the Fed officials speaking talked of the potential for rate cuts, but not right now.  Similarly, ECBs Lane said he’d like to see further moves lower in inflation before seeing rate cuts, ECB’s Wunsch also said he’d prefer to wait before cutting rates.  BoEs Mann was typically hawkish although there are signs she might be softening, potentially moving towards a vote for no change if she sees a suitable drop in services inflation.


We have the US inflation numbers out next Tuesday which will offer the chance to see if the Fed could perhaps cut earlier than they currently think.  There is some interest noted in todays 2023 CPI revision for seasonal adjustments, not usually a talking pojt but Powell did mention it last week so it is well worth watching.  I’m not sure of the timing, I presume 13.30 but can’t find confirmation of this. 


Mind you, some recent inflation data has pointed to perhaps a higher CPI reading.  Regular readers will recall me mentioning the Adobe digital price index, which has been a reasonably reliable indicator of CPI for a while, this showed a gain in January which may suggest we should be cautious ahead of next weeks data.  S&P500 is at all-time highs, just a couple of points away from the 5,000 area, this could fall sharply if that CPI number is higher than hoped. 


We are all waiting for inflation to fall and for rate cuts to come, but there is a risk inflation doesn’t drop as hoped and rates therefore could be held at high levels.  Holtzman, one of the more hawkish ECB officials, bucked the trend of many central bank speakers by saying it is possible there will be no ECB rate cuts this year.  His hawkish views shouldn’t come as a surprise, but that’s not to say he can’t be right.


It certainly isn’t all about rate cuts, that’s for sure.  NZD pushed higher overnight on news that ANZ have lifted their peak RBNZ rate above current rate of 5.5% to 6%, hinting at 25bps rate rises in both Feb and April.  AUDNZD slumped to below 1.0600, the lowest levels since May 2023, while GBPNZD traded down from 2.0720 to 2.0560. 


GBPUSD and EURUSD have been rangebound once again, barely moved from the levels at yesterday morning, 1.2630 and 1.0780, with GBPEUR 1.1715.  We have seen a move in USDJPY, it finally snapped above the 148.80 area to push onto 149.50 where we are right now, he highest levels since Nov 2023 and getting close to that key psychological level of 150.   This has led to FinMin Suzuki confirming the usual ‘we are watching rates’ but this has had no impact, nor has the ongoing talk of a possible move away from negative rates. 


GBPJPY up at 188.85, just a few pips shy of the multi-year highs we saw last month.  Ueda’s insistence that financial conditions will remain easy even when negative rates ends is driving this latest yen weakness.  There is a chance he is he just trying to prevent mass yen panic buying of course.  Asian holidays begin around now, China is out for a week or so, others just for a few days.


Other talking points must be the Putin interview, its much easier for you to look it up than me write about it here but from what I see he didn’t come up with anything particularly new, the usual anti-Ukraine and anti-West rhetoric.  Biden meanwhile has had an odd time recently.  He got off a charge of taking classified documents home after a special counsel talked of significant limitations to Bidens memory.  At a press conference yesterday he refuted this suggestion although we know he has made a hash of recalling names and events recently, and yesterday was no different, where he referred to Eqypt’s leader Sisi as the president of Mexico.  Not doing himself any favours.


Speaking of Mexico, I was surprised to read that Mexico has overtaken China as the largest importer of goods into the US with a 5% increase in 2023 to over $475 billion, while China dropped 20% to $427 billion.


The weekend is almost upon us.  The weather is looking a bit miserable so we might have to stay in and watch a load of Six Nations rugby including England v Wales, and we have a pretty full calendar of premier league fixtures. There is likely to be plenty of talk about the new ‘blue card’ that is set to be introduced in football at some point next season.  The card would be used for dissent and cynical fouls and lead to a sin-bin of ten minutes.  Sin-bins have been used in grassroots football for a while now, I’m not sure how successful they have been. 


I’d imagine the immediate reaction will be ‘we don’t want or need this’ but personally I  think a sin bin for certain offences would be good and may prevent scenes of players crowding and arguing with referees.  I still don’t know why more yellow cards are produced for these though.  Certainly offences that currently attract a yellow card, lets say the cycnical foul where a player impedes an opponent who otherwise would be clear on goal, could well be better served with a sin-bin. 


Enjoy the weekend…


-  10.30 ECBs Nagel speaks

-  13.30 CAD employment

-  18.30 Feds Logan speaks


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