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  • richard evans

Will RBNZ pause rate rises after recent cyclone?

Good morning

As I suspected, yesterday was a fairly quiet one in the currency markets, EUR and GBP lost a little ground against USD but we’re only talking 30 pips or so, not significant. GBPEUR unchanged at 1.1260.

Overnight we saw RBA minutes which explained their decision to raise rates earlier this month, citing more persistence in inflation than had been expected and ongoing strong demand that threatened to push prices higher still. They had discussed a 50bps rise, but chose instead for 25bps, which seems to leave the door open for a 25bps rise at their next meeting which in only a couple of weeks away. AUD did push higher initially but is actually a little weaker now, with GBPAUD up near 1.7500 and AUDUSD at 0.6880.

NZ rate announcement due tonight. Many are expecting a 25bps rise, but there must be a good chance that RBNZ will keep rates on hold after the recent cyclone that caused widespread floods. NZ PM Hipkins said the cyclone will impact the government budget but made it clear it is not the time for austerity. Should RBNZ pause, there must be scope for AUDNZD to move higher. Currently at 1.1050, it was down at 1.0475 in mid-Dec so has moved a fair amount already but dovish noises from RBNZ may well see a test of the 1.1100-50 area. Potential for GBPNZD, currently 1.9320, to test the 1.9400 level that has capped the upside since Dec 2022.

It’s a reasonable day for CAD watchers with retail sales and inflation numbers due out this afternoon. USDCAD now 1.3475, GBPCAD 1.6195, the latter has seen strong support just below 1.6100 for three months or so, expect to see buying on dips ahead of that level if we see any CAD strength after the numbers.

Just a mention of the differing fates of gold and bitcoin. The latter has enjoyed something of a rally through 2023, trading up from $16,500 to $25,000, while gold had tried to climb from the low $1800’s at the start of 2023 to reach $1960 at the start of Feb, however it has managed to lose almost all of those gains, now sitting at $1830. I still struggle to see why anyone would buy Bitcoin over gold. Mind you I did see one suggestion it could reach $1,000,000. Not sure how that number came about to be honest but I suppose anyone with bundles of cash might stick something in bitcoin just to be sure they don’t miss the boat.

PMI numbers out today could be the highlight, I think Putin is addressing the nation at some point as well, we sort of know what to expect from him but I wouldn’t be surprised if he ramps up his anti-west rhetoric and even raises the potential of using nuclear weapons again as well.

- 09.00 EU S&P manufacturing, services PMIs

- 09.30 UK S&P manufacturing, services PMIs

- 10.00 German ZEW

- 13.30 BoC CPI, retail sales

- 14.45 US S&P manufacturing, services PMIs

- 21.45 NZ trade balance

- 00.30 AUS wage price index

- 01.00 RBNZ rate announcement

- 07.00 German HICP


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