Viresh Kanabar
Summary The BoC held rates steady at 2.25% as expected. During the presser, we felt Gov Macklem leaned marginally dovish relative to market pricing. The key message is that due to Canada’s excess capacity and low starting inflation, the BoC can afford to look through the initial energy shock and watch for second-round effects. However, […]
Viresh Kanabar
Summary The RBA hiked its policy rate by 25 bps as we expected. Despite the split vote, Bullock highlighted that the disagreement was on the timing of the rate change rather than the direction. The biggest takeaway for markets came as Gov Bullock reiterated her desire to reduce Australia’s positive output gap, rather than inducing […]
Viresh Kanabar
Hauser Remains Focused on Actual Demand vs. Potential RBA Assistant Governor Hunter gave a detailed speech on the Australian labour market. Here are three takeaways: The RBA looks at a dashboard, not just unemployment. Hunter noted the recent fall in unemployment but stressed the Bank benchmarks labour tightness using a broader suite: vacancy rates, hours […]
Viresh Kanabar
Hauser Remains Focused on Actual Demand vs. Potential Andrew Hauser, who has been central to the RBA’s hawkish shift since November, spoke at a fireside chat this morning. We provide three takeaways from his remarks and Q&A: Reaction function: data over models. Hauser reiterated his scepticism about model-based estimates of the neutral rate and NAIRU. […]
Antonio Del Favero
Summary Bank of England (BoE) BoE to leave rates unchanged at 3.75%. It is a very close call, but we think a 6-3 vote is slightly more likely than 7-2. We expect the guidance in the statement to remain largely unchanged. We see some dovish risks in this meeting, but we think the BoE will […]
Viresh Kanabar
Summary The RBA hiked to 3.85% as expected, citing a strong inflationary impulse, deteriorating inflation breadth, a tighter labour market, strong private sector demand near potential, and accelerating credit growth. Updated forecasts show trimmed mean inflation at 3.2% through end-2025 (up 0.5 pp) and 2.7% by December 2027 (up 0.1 pp). This implies inflation running […]
Viresh Kanabar
Originally published 10.53am, corrected 11.22am. “25 bps cut” to “25 bps hike”, Summary At December’s meeting, Governor Bullock pre-warned markets about the February hike risk by outlining two key watch areas: clear evidence of broadening inflationary pressures signs that financial conditions are no longer restrictive. Since then, inflation, labour market, household spending, and residential investment […]
Viresh Kanabar
Summary The RBA held rates, but Governor Bullock’s presser marked a clear hawkish shift with the balance of risks moving to the upside, and the Board prepared to respond quickly if evidence of excess demand or persistent price pressures builds. The output gap has become central to policy setting with private demand surprising to the […]
Benjamin Ford
Summary The RBA remained on hold and removed its easing bias as inflation became the number one concern. Ahead, there are five key points: The RBA’s stance is clear. Recent inflation data warrants a more cautious posture. However, recent data suggests domestic demand is not growing at the same pace as earlier this year, while […]
Richard Jones
Summary On 14 February, the US Treasury (UST) 2-year, 10-year, and the 30-year yields were at ~4.30%, ~4.5% and 4.70%, respectively. Back then, we thought UST yields would trade within the YTD ranges established at that time. UST yields then plummeted to new YTD lows and have now bounced. Market Implications We think that there […]
Richard Jones
Summary The USD Index (DXY) traded 3.5% lower last week – its worst week since November 2022. DXY is trading slightly higher this week, with the index down for six of the past nine weeks. A key DXY technical indicator, the RSI, is turning from being oversold. Market Implications With the technicals turning, we think […]
Richard Jones
Summary USD/CAD has been on a roller coaster ride so far this month, peaking just below 1.4800 on 3 February, and troughing at 1.4150 on 14 February (both intraday). The pair now trades at ~1.4440, near the middle of its year-to-date (YTD) range. After a one-month deferral on 4 February, President Donald Trump says 25% […]
Richard Jones
Summary Since the US election on 5 November, USD/CAD has rallied about 4.75%, and closed 2024 at the highest level since Q1 2003 (quarterly). President Donald Trump’s threatened 25% tariffs on Canada, with tomorrow (1 February) as a likely imposition date, has partly driven CAD weakness. However, the tariffs might not include oil, which should […]
Richard Jones
Summary The USD Index (DXY) is about 0.75% lower over the past week, dropping with US yields after slightly softer US core CPI. The DXY is about 1.5% off its recent closing peak (which printed on 13 January). Amid a flurry of executive orders from President Donald Trump, the USD has this week closed at […]
Ben Ford
Summary Having passed the federal government’s long-delayed amendments to the Reserve Bank Act back in November, Treasurer Chalmers has delivered the composition of the two new RBA boards. Two new members will join the Monetary Policy Board: Renée Fry-McKibbin and Marnie Baker. Four current board members will transition to the board. The new MPB will […]
Richard Jones
Summary Next week sees a flurry of event risk, with the Fed, Bank of Japan (BoJ) and the Bank of England (BoE) rate decisions standing out. Price action has been largely sideways the past month for the US dollar index (DXY) and US yields, with rangebound trading predominant. Expect markets to remain within the November/December […]
Richard Jones
Summary The UK 2-year yield hovers near last week’s six-month high. The Bank of England (BoE) Monetary Policy Review (MPR), following last week’s 25bps cut, broadly aligned with our expectations, without overly hawkish messaging. However, hawkish Fed pricing is feeding into BoE pricing, which challenges fading elevated UK short-end yields. Market Implications Despite the risks, […]
Richard Jones
Summary The US election triggered very choppy price action across all asset classes, with the USD especially volatile this week. USD/JPY, after spiking initially following the Trump victory, has pulled back considerably. USD/JPY price action makes us think further upside will not come easily, although volatility is likely to persist. Market Implications More USD/JPY downside, […]
Richard Jones
Summary Last week’s Japanese election saw the current ruling coalition lose its majority, starting a rare period of political uncertainty in Japan. Following very choppy price action, USD/JPY initially moved higher this week on this uncertainty, but now trades back near pre-election levels. The Bank of Japan (BoJ) kept rates on hold today but reaffirmed […]
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