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Should we expect lower energy prices?

Good morning


As expected the markets were on the quiet side yesterday due to the US holiday.  GBP did soften a little through the day, losing ground against both USD and EUR, now 1.2585 and 1.1685 respectively, in a move not fully explained.  EURUSD on the other hand held around the 1.0775 area.  We hear from BoEs Bailey and a couple of his colleagues today including Dhingra who was the only member to vote for a rate at the last meeting.  After the dismal GDP numbers last week, Dhingra could push the idea that rate cuts are needed. it will be interesting to hear what Bailey has to say.  I’d imagine he’ll reiterate his previous comments that a recession will be shallow and things are already beginning to perk up a bit.


Overnight there was a little more action as China’s PBoC surprised with a 25bps cut in its 5 year Loan Prime Rate to 3.95%, the first reduction since June last year.  Some had thought a cut was possible, but not as large as 25bps, others thought  that the weakness in CNY would deter PBoC from rate cuts.  China stocks did edge slightly higher but if anything the cut only seems to have served to remind markets that all is not well in China right now.  There was only very limited impact on USDCNY as well, that trades just below the 7.2000 level, despite the official fixing coming in down at 7.1068. 


USDJPY is trading a touch higher, now 150.35, prompting the usual ‘we are watching FX moves closely’ comments from FinMin Suzuki but as we know it is sharp moves that they tend to try to smooth rather than turning the steady yen depreciation.  Still, I can’t help feeling they must have a line in the sand somewhere.  Question of course is where that may be?


RBA minutes overnight didn’t tell us too much other than RBA mulled over a rate rise but the case for holding steady was stronger.  RBA though, like RBNZ recently, still keep the door clearly open for rate rises if inflation doesn’t subside.  Market still looks for eventual rate cuts later in the year.


Other than the usual area of headlines there is little that erally catches thde eye, although I did read about a guy in America who is suing a lottery firm after they published his numbers online suggesting he had won $340 million, only to take the numbers down three days later and claim it was part of a system test.  I wouldn’t be happy.  He has signed up a lawyer who must be pretty exceptional.  His name?  Richard Evans!


Finally, I got a message from British Gas that its time to submit meter readings again.  This follows the news that British Gaqs made profits of £751m last year.  Now, I am all for everyone making money but there is surely something wrong when we’re paying hugely inflated energy prices that only seem to be lining the pockets of the energy firms. 


I have asked why the standing charge for energy remains so high, I understand the price of the product may fluctuate but I don’t see why a doubling or so of the standing charge is necessary.  With natural gas prices now well off last years lows, I don’t know why my gas prices are not collapsing.  Mind you, BG did offer me the chance to fix my energy bill at lower prices.  I presume they’d only do this if they thought prices would be falling.


-  10.15 BoEs Bailey speaks

-  13.30 CAD CPI

-  21.45 NZ PPI

-  23.50 Japan trade

-  00.30 AUS wage price index

-  07.00 UK PSNB

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