- Swiss PPI m/m: 0.0% vs. -0.2% expected, -0.6% previous
- Swiss PPI y/y: -4.7% vs. -5.0% expected, -4.6% previous
- Euro Zone final HICP y/y: upgraded to 0.0 vs. unchanged at -0.1% expected
- Euro Zone final core HICP y/y: unchanged at 1.0% as expected
- MPC meeting minutes: 9-0 vote to hold main rate 0.50% as expected
- MPC meeting minutes: 9-0 vote to maintain asset purchases at £375B as expected
Trading conditions were rather tight during the morning London forex session, with the Aussie being the only clear mover. Forex traders had their eyes on the pound as well, but the BOE’s rate decision turned out to be a dud.
MPC rate decision and minutes – The BOE decided to maintain its current monetary policy by voting 9-0 to keep the official bank rate at 0.50% and the asset purchase facility at £375 billion. This was expected, so no surprises there.
Regarding inflation, the BOE noted that CPI remained subdued “due predominantly to unusually large drags from energy and food prices,” but the BOE expects that they’ll fade over the following year. The BOE warned that CPI would likely decline in April, though, as an Easter-related spike in airfares unwound, but the BOE expects that CPI will rise after that.
The BOE also warned that GDP growth for the first half of 2016 may be slower due to the “striking” fall in commercial property investment, which is linked to the uncertainty brought about by the looming Brexit referendum.
The BOE was also rather pleased with the pound’s recent fall, having depreciated by around 10% since November 2015, since the weaker pound “would act to make financial conditions more favourable for UK companies.” However, the BOE pointed out that the pound’s weakness was due to the uncertainty over the Brexit referendum, which made BOE officials ponder “whether the lower level of sterling would persist.”
The MPC members agreed, however, that a “vote to leave could have significant implications for asset prices, in particular the exchange rate.” Still, the “MPC’s best collective judgement is that it is more likely than not that Bank Rate will need to increase over the forecast period,” so a rate hike is still the next likely move.
Overall, a bit cautious, but nothing really dramatic or new, which is probably why pound pairs barely reacted.
Oil recovers – Oil benchmarks were in the red at the start of the morning London session, thanks to the IEA trimming its forecasts for global demand earlier. However, oil benchmarks were able to claw their way higher near the end, with U.S. crude oil up by 0.10% to $41.80 per barrel and Brent crude oil up by 0.14% to $44.24 per barrel. Market analysts couldn’t pinpoint the reason for the recovery in oil prices, though.
Major Currency Movers:
AUD – The Aussie was the only real move during the morning London session since it extended its gains from the earlier Asian session. There weren’t any catalysts for the Aussie’s strength during the session, but it’s highly likely that European forex traders were pricing-in Australia’s better-than-expected jobs report.
AUD/USD was up by 37 pips (+0.49%) to 0.7702, AUD/JPY was up by 47 pips (+0.58%) to 84.25, AUD/CHF was up by 27 pips (+0.38%) to 0.7439
CAD – Volatility on Loonie pairs was a bit more subdued when compared to Aussie pairs, but the Loonie was noticeable since it was clearly winning out against its forex rivals, with the exception of the Aussie, of course. The Loonie’s broad strength was probably due to the recovery in oil prices during the session.
USD/CAD was down by 30 pips (-0.30%) to 1.2832, EUR/CAD was down by 35 pips (-0.24%) to 1.4448, NZD/CAD was down by 12 pips (-0.14%) to 0.8810
- 1:30 pm GMT: U.S. headline (0.2% expected, -0.2% previous) and core (0.2% expected, 0.3% previous) CPI readings
- 1:30 pm GMT: U.S. initial jobless claims (270K expected, 267K previous)
- 1:30 pm GMT: Canada’s NHPI (0.1% expected, same as previous)
- 3:00 pm GMT: U.S. Fed Governor Jerome Powell will testify before the Senate Banking Committee
- 9:00 pm GMT: BOE Deputy Governor Nemat Shafik will be speaking in a panel discussion
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
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