The RBNZ must revamp the monetary policy outlook this week facing a political minefield. The starting point for inflation is significantly higher than previously forecast, and it is now close to target. The exchange rate has fallen to a low since mid-2016 and is likely to place some upward pressure on inflation. The economy is […]
The market had a glacial pace of hikes priced-in for the UK over the next three years, and the Bank of England Inflation Report largely reinforced these expectations. Two of nine MPC members dissented from the hike and appear to reflect market expectations that inflation pressures (beyond that driven by GBP depreciation) will remain subdued, […]
Political turmoil has risen to the fore again in the USA. There are so many parts intertwined in the political and social turmoil in the USA that it is hard to know how much it will affect the real economy or financial markets. It is a moving feast that will persist for the foreseeable future. […]
Major corrective moves may be underway in EUR and NZD. Further weakness may also be in stall for CAD and AUD. In the case on EUR, CAD and AUD, long positions and bullish sentiment leave them vulnerable to position-squaring. The EUR has moved too far from its yield disadvantage, and it is not as cheap […]
In our view, the probability of a Bank of Canada hike on Wednesday is essentially zero, creating some risk of a further kneejerk rise in USD/CAD. The market is pricing in a modest 19% chance of a hike. The tone of the Bank’s statement, press conference and Monetary Policy Review will probably reflect the message […]
It is universally anticipated that the ECB announces a significant taper or reduction in the pace of its asset purchases on Thursday this week. Expectations have settled on a halving in the monthly amount to EUR30bn, while adding nine months to the current program that ends in December this year. However, it appears that most […]
The NZD has taken a hit on the formation of a un-proven left-leaning coalition, after nine years of a right-leaning, essentially one-party led government that oversaw a return to significant budget surplus and stable solid economic growth. At least some change was always coming, since the election on 23-September, as NZ First held the balance […]
The market has spent much of this year unwinding a structural short EUR position. Bank analysts have shifted to a bullish long-term EUR view, ECB QE taper is largely priced-in, the political risk gap between Europe and the USA has narrowed, and the EUR is now stretched from its widening yield disadvantage. Traders appear to […]
Canadian house price growth has cooled abruptly in recent months from rapid growth in the first half of the year. After broad-based economic strength in the first half of the year, recent Canadian economic reports have been mixed. A reversal of fortunes in the housing market may contain consumer confidence and activity. In late-September, BoC […]
Not a big response in US rates and yields to the FOMC minutes, although the USD appeared to weaken somewhat. The FOMC minutes continue to reveal a broad church with some forecasting fewer hikes, concerned by low inflation and wages growth, fearing that this is spilling into lower inflation expectations. Others have more confidence that […]