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EUR

06 Mar 2023

RBA nearing the end?

• ECB repricing. Hawkish comments reinforced expectations the ECB could raise rates aggressively over future meetings. This supported the EUR.• Fed in focus. US Fed Chair Powell speaks tonight. We think the run of US data should see Chair Powell reiterate that the Fed has more work to do.• Another RBA hike. RBA expected to raise rates another 25bps today. But will it tinker with its forward-looking policy guidance? A quiet start to the week, though there were some divergences across asset markets with the underlying theme of central banks continuing to raise rates to fight inflation still front-of-mind. Following...

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06 Mar 2023

Currencies Stabilize As Pivotal Week Begins

Investors are bracing for a momentous week, with Jerome Powell’s Congressional testimony, three major central bank meetings, and the February non-farm payrolls report combining to set the stage for erratic price action in currency markets. The dollar is climbing, yields are ticking lower, and the euro and pound are tightly rangebound. Commodity-linked currencies sold off over the weekend as China’s leadership unveiled a more cautious growth agenda than had been expected. Work documents released during the National Party Congress outlined plans to increase state outlays and expand the budget deficit, but Beijing set its headline gross domestic product target at...

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05 Mar 2023

China disappointment

• China targets. China’s 2023 growth target was a little lower than expected. Fiscal support also looks set to be more restrained than anticipated.• Risk sentiment. Equities rose on Friday, but the China developments, and ‘hawkish’ rhetoric from Fed Chair Powell could weigh on risk appetite this week.• AUD pressure. RBA widely expected to hike another 25bps. But we think there is a risk its forward-looking rate guidance is adjusted. Market attention remains on bond markets. The uptrend in global yields paused for breath on Friday, with the US 10yr falling by ~10bps to end the week back below 4%....

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02 Mar 2023

Rates still adjusting

• Higher yields. Markets continue to adjust interest rate expectations higher with inflation pressures showing limited signs of abating.• USD rebound. The larger lift in US bond yields has boosted the USD. Equity markets are looking increasingly complacent to the macro landscape.• AUD crosscurrents. Relative interest rate differentials are a AUD headwind. But the high level of commodity prices is an underlying support. The upswing in bond yields has continued with markets coming around to the view that interest rates will need to keep moving higher and stay at very elevated levels for some time to slow growth and (hopefully)...

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01 Mar 2023

Bond yields still rising

• Higher bond yields. Inflation pressures and ‘hawkish’ rhetoric continues to fuel expectations of ongoing rate hikes by the major central banks.• China reopening. Large lift in the PMIs on the back of the reopening. This has supported commodities. But it may add to inflation down the track.• AUD range bound. Positive China developments has been offset by sluggish domestic growth and signs inflation has passed its peak. The upswing in global bond yields has continued, with inflation concerns front-of-mind for investors. Positive risk sentiment in yesterday’s Asian trade generated by the large lift in the China PMIs as the...

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