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Kiwi higher after RBNZ, now we wait for US inflation numbers

Good morning


I’ll start with RBNZ given yesterdays report caused a bit of a stir among readers.  Yes, I incorrectly stated that in February ANZ had been looking for rate cuts when in fact they had been looking for a rate rise or two.  They were disappointed back then, and again today, as RBNZ left rates on hold although their hawkish stance will be boosted by the central bank saying that rates will have to stay high for a sustained period to tame inflation.  They are nothe first central bank to suggest this and I am sure will not be the last.  NZD is higher, NZDUSD now 0.6070 so some way from the NZDUSD put option I mentioned yesterday with a 0.6025 strike.  A higher US inflation reading this afternoon is my only hope!


At the time of writing, GBPUSD is sitting at 1.2690, a touch higher than yesterday which in turn was a touch higher than the previous day.  EURUSD is actually unchanged at 1.0855 which has helped GBPEUR trade back up within a few pints of 1.1700.


The latest US inflation numbers will be released today.  The result should be pretty binary, ie a higher reading and a strong dollar, a lower reading and a weaker dollar.  Not much more to it than that,  The market is looking for slightly softer readings that last month.  Some excitement over press reports that an unnamed bond trader has placed a pretty huge trade that will be profitable if we see three rates cuts from the Fed this year.   Worth remembering that there are two sides to every trade so while emphasis is put on this, there will be a party that stands to make if we don’t see three rate cuts this year. 


At the moment, the odds of a June cut are pretty even, todays report could well set the tone for whether we’ll see anything in June.  Oil prices had started to push higher in March but it may be a month or so before we see the impact of higher prices on CPI.


USDJPY remains in the high 151’s, BoJs Ueda has said they will not use policy to directly resond to a weak yen, possibly clarifying his recent comments that suggested moving rates to help yen would be a possibility.  He does still say that if yen weakness were to impact inflation BoJ may look at rates, a very similar thing but not quite the same, rates won’t be used to push yen higher for the sake of it, but could if yen itself is affecting inflation.  Some press reports out of Japan suggest they may raise their inflation forecasts this month.  Elsewhere in Asia, I see Fitch have downgraded China’s outlook to negative from stable.  China aren’t happy.


We have a rate announcement from Canada today, they are expected to keep rates unchanged but as with RBNZ we’ll be looking to see any comments of potentially stickier inflation than has previously been hoped.  For the record, USDCAD currently 1.3565, GBPCAD 1.7205.

There was some exciting action in the first of the Champions League quarter finals where Arsenal drew 2-2 with Harry Kane’s Bayern Munich, while Man City won’t be too disappointed with a 3-3 draw at Real Madrid.  Some high quality football on display.  No English clubs are involved in this evenings quarter finals, but I’m hoping for equally exciting matches.   


Finally, my thoughts are with those in Cowes who experienced flooding Tuesday night after high tides brought water into the high street.  I’m hoping the damage isn’t too great although the pictures suggest many businesses will have been badly affected.  Unless I am mistaken we have seen the worst of the high tides.  The sun is shining today, not enough to dry things out but at least makes having windows and doors open slightly less of a chore.


It is my eldest’s birthday today. He’ll be 20, no longer a teenager, that’s enough to make me feel old.  He’s a pretty big lad, standing at about 6’3” in his socks.  Not bad going given he weighed just 4lb 4oz when he was born some eight weeks early.  Not quite sure how that happened.  Must take after his Mum…….


-  13.30 US CPI

-  13.45 Feds Bowman speaks

-  14.45 BoC rate announcement

-  15.30 BoC press conference

-  17.45 Feds Goolsbee, Barkin speak

-  19.00 FOMC minutes, monthly budget statement

-  02.00 AUS consumer inflation expectations

-  02.30 China CPI, PPI


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