top of page

RBNZ cuts 50bps with more expected in November, USD finds a bid ahead of tomorrows US CPI

richard evans

Good morning

 

With no economic data on the calendar, yesterday was another calm day in the currency markets with most pairs stuck in reasonably tight ranges.  GBPUSD held mostly between 1.3085 and 1.3105, bar a few brief forays outside that range, EURUSD had an even tighter main range of 1.0980-1.0990, again with a few moves outside that range either side.  By the London close they were 1.3085 and 1.0965, placing GBPEUR at 1.1930.

 

This morning we have seen USD buying, which took GBPUSD down to a low of 1.3055 and EURUSD to 1.0950.  For EURUSD this was the lowest level since mid-August, while GBPUSD has half an eye on the Sept lows of 1.3000.  We are now 15 pips or so off those lows, I wonder whether this bout of USD strength is down to lower US rate cut forecasts or safe-haven buying on fears of Middle East escalation.  The likelihood is that it is a combination of these, plus some repositioning ahead of tomorrows US CPI inflation release.

 

Biden is reported to be speaking with Israeli PM Netanyahu today on potential Israeli strikes on Iran.  This follows a meeting with senior Israeli ministers yesterday to decide timings and targets of attacks.  Whether Biden will encourage Netanyahu to avoid further escalation, indeed whether they even listen to Biden, remains to be seen.  It is not even clear if Israel have decided on the nature of their response.  I think they should do nothing, but that’s highly unlikely.

 

Overnight we had the RBNZ rate announcement.  They cut rates 50bps to 4.75%, even though the cut was widely expected we have still seen NZD weaken, with  GBPNZD pushing as high as 2.1535, although is now back at 2.1470.  AUDNZD is now 1.1060 just a few points off its overnight highs, while NZDUSD is 0.6085.  RBNZ said they believe inflation is now back within their 1-3% target range.  The statement suggested further cuts were likely and didn’t fully dismiss the idea of a 75bps cut, should the economy see a downturn.  Indeed, a couple of large banks have adjusted their November forecasts, now looking for a 75bps cut, although most currently seem to be content with their 50bps calls.  Much will depend on incoming data over the next month or so.

 

The stimulus led boost to China equities has come to an abrupt halt, with Shanghai Comp down 6.5% and CSI 300 down over 5% overnight, the market still reeling from the lack of the announcement of further measures at yesterdays NDRC. 

 

Hurricane Milton is set to make landfall in Florida today.  There have been mass evacuations ahead of its arrival, which is expected to bring widespread flooding and damage, and unfortunately a loss of life.  It has been referred to as a ‘once in a century’ storm although I’d put money on there being more before we reach 2100. 

 

Talk Boeing could be downgraded to junk, as strikes hit cash flow, although it is fair to say their problems started much earlier, back to the two crashes of its 737 Max planes some years ago and a couple of other technical issues, including more recently a door flying off a plane in flight.  Incredible that a company with such a household name and such a history can potentially be reduced to junk status.  If it were to happen, the refinancing of their US$4bn debt in 2025 and US$8bn in 2026 will be more expensive.  All this on top of what S&P say could be a cash  outflow of US$10 if strikes continue to late 2024.

 

We have another empty calendar today, FOMC minutes this evening will be of interest as they relate to the meeting where we got a 50bps cut.  I’ll be using what I think will be another quiet day with some admin, and perhaps scanning through Amazon’s Prime deals to see if I can find decent bargains on yet more stuff that I just don’t need.   For example, I’ve seen a deal on a Ninja air fryer, which on the face of it looks good.  I’d probably succumb except if I’m honest my wife does 99% of the cooking and she has never expressed an interest in one so I think I’ll be giving it a miss, however tempting it may be. 

 

Let me leave you with one thought that puts some of the numbers we regularly read about into perspective, I won’t take credit for this, I saw it online somewhere.  Musk is worth some US$250bn.  We all know that’s a lot and to be fair to him he has built that on several successful businesses.  But to give that that amount of money some reality….you would need to save US$10,000 every single day for around 80,000 years to have that sort of money. 

 

-  09.30 ECBs Elderson speaks

-  17.30 Feds Jefferson speaks

-  19.00 FOMC minutes

-  23.00 Feds Daly speaks

-  01.00 AUS consumer inflation expectations

 

1 view0 comments

Recent Posts

See All

Comentarios


© 2020 Island FX Ltd.

bottom of page