Good morning
All quiet in the currency markets yesterday, the main point of interest is a slightly weaker US dollar, despite last weeks rather storming nonfarm payroll number and some comments from Fed officials since then that puts further doubt on the prospects of a June rate cut. Feds Kashkari, a known hawk, said the labour market remained tight and she pointed at higher oil prices as a cause for concern that inflation may not reach the 2% target, urging Fed to keep battling. To balance the argument, ex-Feds Bullard still sees three rate cuts this year, while the Times has an article suggesting central banks were slow to raise rates and are likely to be equally low at cutting rates.
GBPUSD is up at 1.2655, EURUSD 1.0855 which puts GBPEUR 1.1655. USDJPY at 151.90, just a whisker away from 152.00 and FinMin Suzuki’s insistence that they are watching FX levels carefully and will act as required is having little visible impact. BoJs Ueda was also speaking overnight, he said that they would likely have to think about reducing monetary support in the coming months but made it clear that it was important monetary policy remained accommodative until inflation reaches 2%.
Gold has pushed back above $2,350, perhaps the reports that the Israel/Hamas peace talks are not going so smoothly is putting upward pressure on the precious metal. Hamas said Israeli demands were unreasonable, I presume those demands were ‘please release all hostages’. UBS has raised their forecasts and now sees gold at $2,400 by year end, citing geopolitical risks and official buying (as I reported yesterday).
It is another light day in terms of economic data but things do start to get more interesting tonight, with the RBNZ rate announcement. They are widely expected to keep rates unchanged at 5.5%, although RBNZ Gov Orr had said back in late March that normalised rates were on the horizon. At the last RBNZ meeting in Feb there were some (ANZ) looking for a rate cut and while they did surprise by being less hawkish than generally expected, they didn’t go as far as cutting rates.
While I think it is something of an outside possibility, there is a risk of a surprise cut here so I’m tempted to look at NZD downside. An overnight 0.6025 NZD put costs around 20 usd pips, just in case we do see NZD weakness. NZDUSD is currently 0.6035, just 15 pips off the highest levels seen over the last two weeks or so and remember that overnight options do take in the US inflation numbers that are released tomorrow. Might just be worth a flutter.
Little else to report this end. I’m pleased many across the world were able to see yesterdays eclipse so clearly. Just as well it’s not here today, you wouldn’t see anything anyway, such is the cloud and rain. More wind and rain expected, and temperatures to remain below 15° for another couple of days. Fair to say I’m getting more than a little fed up of this weather now.
Have a great day
- 09.00 ECB lending survey
- 03.00 RBNZ rate announcement
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