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  • richard evans

RBA raise rates 50bps in effort to curb inflation

Good morning

Boris Johnson survived his confidence vote but it was a pretty close call, with 40% or so of his party voting against him. That’s not a great result for him although I’m not sure he’ll be overly concerned nor surprised, however running a party where nearly half of the members are against you is never going to be easy. Odds on Betfair suggest Johnson will still be in power at the 2022 party conference but will not be the Tory leader at the next general election.

Data overnight suggests UK households are reining in spending as cost of living rises. GBP is lower although seems to reflect a stronger US dollar on higher bond yields, GBPUSD was down at 1.2430 at one point this morning, 100 pips lower than the ‘close’ last night. It has recovered to 1.2485. EURUSD saw a similar although less pronounced shift lower, trading to 1.0660 from 1.0700, but has since made back the vast majority of those losses and now sits 1.0690. This leaves GBP lower against EUR, EURGBP now 0.8565 (GBPEUR 1.1675).

RBA have raised rates 50bps, even more than upper end of expectations, taking rates to 0.85% as it promises to return CPI to target over time. They say inflation has increased significantly and is expected to increase further before settling back to a 2-3% range. AUDUSD traded from 0.7185 to 0.7245 initially before falling back to pre-announcement levels although AUD has held gains elsewhere with AUDNZD up at 1.1140 and GBPAUD down to 1.7340, the latter having traded to 1.7285 in the initial move.

USDJPY has had a shift higher, helped by those higher US bond yields pushing US dollar up. trading to 133.00 before slipping back just a little to 132.75. BoJs Kuroda has said a weak yen is beneficial for Japans economy but only if the moves are not too sharp, while Japan FinMin Suzuki has said rapid yen moves are inappropriate and could have an adverse effect on the economy. Once again he mentions the G7 commitment to currency stability, suggesting any intervention would have to be coordinated and agreed by all.

It is that time of year where the great and the good meet in an exclusive location to discuss matters of significant importance. No, I am not talking about Davos. Love Island is back on the box, where absurdly beautiful ladies and equally absurdly fit and chiselled guys live together for eight weeks to find love and win £50,000. Quite why I am drawn to the show is a little beyond me but I just can’t help it. I have always enjoyed people-watching, I promise not for the scantily-clad young ladies but to see how different people behave in different situations.

Most importantly though, you may remember me mentioning that my wife seems to have a knack of choosing possible winners and losers, which has led to come decent betting profits in the past. Lets hope she stays true to form. I’ll do a little bit of public service by reporting on here every now and then to keep you up to date with current goings on meaning you don’t have to watch it.

- 09.30 UK S&P global

- 13.30 US goods trade balance

- 13.30 CAD Intl merchandise trade

- 15.00 CAD Ivey PMI

- 00.50 Japan GDP, current account

- 07.00 German industrial production

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