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  • richard evans

Will Fed push back further against possible rate cuts?

Good morning

 

Welcome to March.  Spring come later this month but looking out of the window now it feels a very long way off.  Heavy rain, with more expected, its dark and gloomy. 

 

US inflation, this time in the form of the Feds favourite, the PCE deflator, is still showing signs of resilience after coming out in line with expectations yesterday and supported the recent comments from Fed officials that although rate cuts may be appropriate later in the year, now is not the time.  Indeed there is some suggestion now that the March FOMC dot plot could point to fewer rate cuts through 2024 than the 75bbps currently expected.  The market has only just caught up with Fed thinking that three 25bps cuts is more likely than the five or six some had been forecasting, now it could be the Fed pushes rate cuts back even further.

 

RBNZs Orr suggested a similar theme for RBNZ, namely that although inflation is coming lower it is still far too high and central banks could leave rates higher than the markets expects for some time, indeed he thinks 2025 will be more appropriate for rate cuts. 

 

All of this pushed USD higher across the board yesterday although moves were not particularly extreme.  GBPUSD fell from its highs around 1.2680 to 1.2615 (now 1.2630), EURUSD shifted lower from 1.0855 to briefly dip below 1.0800, now 1.0810.  GBPEUR pretty much unchanged around 1.1685.

 

USDJPY regained 150.00 with some ease overnight after BoJs Ueda spoke.  He made it clear that inflation is not yet at target, seemingly playing down any chances of a March rate rise.   Once again he mentioned the upcoming wage talks with unions, highlighting the importance of this.  As I type, USDJPY is 150.50.

 

Overall, even despite a bit of movement yesterday, it has been a remarkably quiet week in the currency markets, with tight ranges noted in the likes of GBPUSD and EURUSD.  Todays calendar includes EU inflation and US manufacturing ISM, but I don’t think these will offer enough to push the markets out of these tight ranges, while Fed officials speaking later today will surely follow the same theme as their colleagues, perhaps worth watching just in case there is any suggestion of fewer rate cuts through 2024.

 

In other news, well where to start?  George Galloway has returned to politics with a win in the Rochdale by-election, where alleged voter and candidate intimidation was at the fore.  Galloway may have won only because Labour didn’t have a candidate, but in declaring his victory was for Gaza he certainly appealed to the many Muslim voters in the area.  Still, with second place going to the independent David Tully, it could be indicative of voters choosing to move their votes away from the mainstream parties, something Labour in particular will be concerned about.

 

Elsewhere, the Telegraph reports that Putin could be behind the immigration the West is seeing from Africa in an effort to destabilise Europe.  The suggestion is that Russian backed private militias are taking control of immigration, with an ultimate aim of influencing elections.  Immigration numbers are already high, the UK handed out some 1.4m visas in 2023 according to Braverman in the Daily Express. 

 

In sport, well Paul Pogba, of Man Utd and then Juventus, has been handed a four year ban for doping offences,  He denies the claims but unfoertuantely anyone who follows football would be able to tell that all has not been right with Pogba for some time.  Also in football, this years Spanish Copa del Rey will be between Athletico Bilbao and Mallorca, only the third time on the past 14 years that neityher Real Madrid nor Barcelona have appeared in the final. 

 

This weekend sees premier league action with Spurs, desperately needing a win, taking on Crystal Palace.  The highlight is likely to be the two Manchester sides battling it out on Sunday afternoon.  This weekend also sees the start of the F1 season, with the Bahrain Grand Prix.  Smart money is still on Red Bull. 

 

Finally, just when we think we know almost everything there is to know, I see that a new species of sea slug has just been discovered off the coast of the UK.  OK, so sea slugs are not the most exciting thing in the world, but I still find it amazing that we can fly off to space but there are still things we don’t know about our own waters. 

 

On that note I’ll end, have a great Friday and enjoy the weekend as and when it comes.  Stay dry, I’m hopeful that by next weekend we’ll be seeing sunshine.

 

 

-  10.00 EU HICP

-  14.00 BoEs Pill speaks

-  14.30 CAD S&P manufacturing PMI

-  15.00 US manufacturing ISM, Michigan sentiment survey

-  15.15 Feds Waller speaks

-  16.00 Fed monetary policy report

-  17.15 Feds Bostic speaks

-  18.30 Feds Daly speaks

-  20.30 Feds Kugler speaks

 

 

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