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  • richard evans

USD continues its march higher amid talk of rate rises, while we await US employment numbers

Good morning

US dollar has had another push higher, helped in no small part by comments from Feds Bowman who said its likely Fed will need to raise rates a few more times and hold them higher for longer, adding that higher energy prices could reverse some of the recent inflation declines. JPMorgan CEO Dimon added to the notion of more rate rises by confirming he still thinks rates could reach 7%, and Feds Mester said she would not be surprised to see another rate rise this year. Feds Powell was a little more measured but did say the US economy was healthy but still coming through the effects of the pandemic, while Feds Barr said rates were at or near sufficiently restrictive levels and seems slightly more concerned of two-way risks.

The USD strength took GBPUSD to 1.2060 this morning, EURUSD traded to 1.0460 and USDJPY got to within a few pips of 150.00, all are about 20 pips off those levels now but this USD march is looking pretty healthy for the time being. Hawkish comments from BoEs Mann has done little to help GBP, she thinks more frequent inflation shocks are possible. Worth noting though that Goldmans still think Fed, BoE and ECB will keep rates at current levels until late 2024. Even if this is the case it is diffiuclt to see where any significant USD weakness would come from.

RBA kept rates unchanged at their meeting earlier this morning sending AUD lower. AUDUSD, already under pressure from the strong USD, slipped further to touch 0.6305 while AUDNZD moved below 1.0700 for the first time since May, when the pair was dragged higher after RBNZ raised rates by a smaller than expected 25bps and signalled it was finished with rate rises. We will have the RBNZ rate meeting overnight, no change is expected but plenty of potential for further volatility here depdning on the wording of their statement. RBNZ may have felt they were finished with rate rises but plenty still think we’ll see another 25bps increase from them later this year. GBPAUD now 1.9110, GBPNZD 2.0445.

US JOLTS jobs numbers out this afternoon, known to be one of Yellen’s favourite indicators when she was at the Fed so well worth keeping an eye on. Any strong US data will only serve to support USD while we await the key US nonfarms on Friday,

Did want to mention though that a while back I’d talked of my outrage at water firms who have been happily paying vast dividends to shareholders rather than making much-needed investment in infrastructure. Now I read once again that those same water firms have asked permission to push up domestic bills in order to pay for this investment. Now, I do not mind companies making money and rewarding those who invest in those firms. But this does not feel right. Money that should have been invested wisely has been given away. Pretty disgraceful stuff if you ask me.

Running a bit late this morning so I’ll leave it there.

- 15.00 US JOLTS job openings

- 23.00 AUS S&P services PMI

- 02.00 RBNZ rates announcement

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