The Bank of England is expected to largely proceed as normal today on ‘Super Thursday’ when the central bank releases its policy decision and statement plus the Inflation Report.
US Fed’s Dudley spoke at an event jointly hosted by Thomson Reuters and the European American Chamber of Commerce in New York about Banking Culture. Dudley made comments that there has been progress in bank culture but more can be done. They are not expecting a huge bank deregulatory swing. The Fed is focussed on feedback loops in the markets. The stock market bump has no effect on economic outlook but a sustained drop would impact outlook. The market is generally functioning ok and general liquidity is pretty good. The Fed will continue to study the effects of regulations on liquidity.
US Consumer Credit Change (Dec) was $18.45B v an expected $20.00B, from a previous $27.95B.
The Reserve Bank of New Zealand Interest Rate Decision was left on hold, as expected, at 1.75%. The Rate statement and the Monetary Policy Statement were released at the same time. Some of the comments from the RBNZ were that policy will remain accommodative for a considerable period. The forecast is for rates to rise in the second quarter of 2019. Numerous uncertainties remain and policy may need to adjust. The RBNZ sees inflation reaching 2% in Q3 of 2020 versus Q2 of 2018. It cut the Q1 2018 growth forecast to 0.8% from 1.2% previously. The move in NZD is largely due to the move in USD. The CPI is forecasted to trend upwards towards the midpoint of the target and domestic economic growth is projected to strengthen. House price inflation has increased somewhat but housing credit growth continues to moderate. Labour market conditions continue to improve. The RBNZ has revised down the impact of new government policies in the near term. The NZDUSD fell to session lows of 0.72088 when this data was released.
Comments from the RBNZ Press Conference discussing the rate decision and monetary policy statement were: that the next rate move could be up, or it could be down. Market volatility is seen as a “bit of a warning sign” and shows nervousness towards interest rate normalisation but there was no reason to change forecasts after equity market volatility. The RBNZ remains confident about heading towards the inflation target and that its policy stance is sensible. If volatility translates into interest rate markets it would be an upside risk on the bank’s interest rate track. RBNZ Governor Spencer said that ‘’we are reasonably close to a neutral level of unemployment’’. About the NZD, he stated he is not concerned about it, is comfortable where it is, and expects it to drift lower but stay in this vicinity and normalisation of rates will happen, the risk is if it happens quickly. The NZDUSD has continued its decline to 0.71804.
US FOMC Member Williams spoke at a community leader’s luncheon in Honolulu, Hawaii. He does not see the economy as a bubble or headed into overdrive and he sees inflation picking up this year. He said that he can see productivity continuing to moderate. The Federal Government has an unsustainable fiscal path and the Fed is focusing on inflation, as the job market has tightened. He said that he is not worried about the debt crisis right now and if the economy continues to add 2M jobs this year he expects to see inflation pressures. The recent market turmoil has not changed policy or economic outlook. The US economy can clearly handle gradually rising interest rates. He also made the comment that the goal of Wells Fargo penalties was to send a message: banks in the US must follow laws and regulations.
Japanese Foreign Bond Investment (Feb 2) was ¥-886.6B from ¥41.1B previously, which was revised down to ¥16.4B. Foreign Investment in Japanese Stocks (Feb 2) came in at ¥-126.7B from ¥-300.5B previously, which was revised up to ¥-171.8B. USDJPY hit a low of 109.114 after the release before retracing higher.
Chinese Exports (YoY) (Jan) were 11.1% v an expected 9.6%, from 10.9% previously. Imports (YoY) (Jan) were 36.9% v an expected 9.8%, from 4.5% previously. Trade Balance USD (Jan) was $20.34B v an expected $54.10B, from a prior $54.69B. Exports CNY (YoY) (Jan) were 6.0% from 10.8% previously, which was revised down to 7.4%. Imports CNY (YoY) (Jan) was 30.2% from 18.7% previously. Trade Balance CNY (Jan) was 135.80B v an expected 325.00B, from a prior of 361.98B. The miss in the trade balance has caused USDCNH to move up 0.50% to 6.35201.
Japanese Economy Watchers Survey: Current (Jan) was 49.9 v an expected 53.7, from 53.9 prior. Economy Watchers Survey: Outlook (Jan) was 52.4 v an expected 53.5, from 52.7 prior. USDJPY continued its move higher to reach 109.766, from 109.557, when the data was released.
EURUSD is unchanged overnight, trading around 1.22636.
USDJPY is up 0.42% in early session trading at around 109.765.
GBPUSD is up 0.08% to trade around 1.38890.
USDCNH is up 0.62% overnight, trading around 6.35860.
NZDUSD is down -0.75% overnight at around 0.71828.
Gold is down -0.55% in early morning trading at around $1,310.70.
WTI is down -0.15% this morning, trading around $61.51.
Major data releases for today:
At 07:00 GMT, German Current Account n.s.a. (Dec) is expected to be €25.0B from a previous €25.4B. Exports (MoM) (Dec) are expected to be -1.0% from 4.1% previously. Imports (MoM) (Dec) are expected to be -0.5% from 2.3% previously. Trade Balance s.a. (Dec) is expected to be €21.7B from a prior €22.3B. EUR pairs could move because of this data release.
At 08:45 GMT, German Buba President Weidmann will speak on Monetary Policy in the European Context at the Monetary and Economic Policies on both sides of the Atlantic conference in Frankfurt.
At 09:00 GMT, RBA Governor Lowe will be speaking at the A50 Australian Economic Forum in Sydney. His comments have the potential to influence trades on AUD.
At 13:30 GMT, the Bank of England Interest Rate Decision is expected to be left unchanged at 0.5%. The BOE Minutes, BOE Quarterly Inflation Report and the Monetary Policy Statement will be released at the same time. The BOE Asset Purchase Facility is expected to come in unchanged at £435B. GBP crosses could see a spike in volatility after this data is released.
At 13:15 GMT, Canadian Housing Starts s.a. (YoY) (Jan) are expected to be 210K from a previous 217K.
At 13:30 GMT, US Initial Jobless Claims (Feb 2) are expected to be 232K from a previous 230K. Continuing Jobless Claims (Jan 26) are expected to be 1.945M from 1.953M previously.
At 14:00 GMT, US FOMC Member Kaskari will be speaking. USD crosses and US assets may experience volatility around this time in reaction to his comments and audience questions.
At 14:00 GMT, Canadian BOC Governing Council Member Wilkins will be speaking on innovation and inclusive growth at the G7 Symposium in Quebec. CAD crosses could be volatile around this time in reaction to comments made.