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Central Banks: Market Recap


MongiIG

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Central Banks: Market Recap

 

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1. RBA Market Recap

The RBA have made it clear that the inflation fight is on, hiking 0.5%; AUD/USD leapt half a cent on the news, but is struggling to hold the gains and the RBA have joined the race. Will AUD/USD be the beneficiary?

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Source: TradingView
 
The Australian dollar flew higher after the RBA joined the jumbo rate hike brigade by lifting the cash rate by 50 basis points to 0.85% from 0.35%.

The market had mostly been oscillating between a move of 25 or 40 basis points (bps), although a small number of observers had anticipated a 50 bp move.

Straight after the decision, AUD/USD went from 0.7180 to trade above 0.7240 but later retraced back under 0.7200. The ASX/S&P 200 index sank further to be down 1.7% at the time of going to print.

The three-year Commonwealth Australian Government bond yield went 12 basis points higher to 3.28% immediately after the announcement.

Daniel McCarthy | DailyFX Strategist, | Publication date 07 June 2022

 

2. ECB Market Recap

ECB Holds Rates, Setting up July and September for Fireworks.

ECB HOLDS RATES, EYES 25 AND 50 BPS HIKES IN JULY AND SEPTEMBER.

  • The ECB held true to its forward guidance and sequencing whereby it foresaw a rate hike only after APP comes to an end, meaning July is when we are very likely to witness lift-off.

PERTINENT POINTS OF THE 9 JUNE ECB MEETING:

  • Rates left unchanged but the ECB intends to raise by 25 basis points in July
  • ECB intends to reinvest, in full, principal payments of maturing securities under both APP and PEPP. PEPP reinvestments to continue until end of 2024 at a minimum while leaving APP reinvestments open-ended. Purchases under PEPP could be resumed if necessary to counter negative shocks related to the pandemic.
  • Real Annual GDP growth: 2.8% 2020, 2.1% in 2023 and 2.1% in 2024
  • ECB Inflation forecast 6.8% in 2022, 3.5% in 2023 and 2.1% in 2024
  • "If medium-term inflation outlook persists/deteriorates, a larger than 25 bps hike will be appropriate for the September meeting"

Jun 9, 2022 | DailyFX Richard Snow, Analyst

 

3. FOMC Market Recap

Fed Raises Rates by 75 Basis Points in Largest Hike Since 1994 in Effort to Crush Inflation.

FOMC KEY POINTS:

  • The FOMC comes out all guns blazing and raises the federal funds rate by 75 basis points to 1.50-1.75%, delivering the biggest single meeting hike since 1994
  • The policy statement acknowledges that officials are highly attentive to inflation risks
  • Policymakers signal the benchmark rate will end 2022 at 3.4%, up from 1.9% forecast in March, implying 150 bp of additional tightening over the remaining four meetings of the year

May FOMC Decision | Cumberland Advisors

Written by Diego Colman, Market Strategist for DailyFX. 16th June 2022

 

4. BoE Market Recap

Bank of England Raises Rates by 25 Basis Points to 1.25%, British Pound Slides

BANK OF ENGLAND RATE DECISION:

  • Bank of England raises interest rates by 25 basis points to 1.25%, in line with market expectations
  • The bank says second quarter GDP is likely to fall by 0.3%, recognizes that inflation risks have risen
  • MPC drops tightening language, says the scale, pace and timing of any further increases in rates will reflect the Committee's assessment of the economic outlook and inflationary pressures
Bank of England Raises Rates by 25 Basis Points to 1.25%, British Pound  Slides
Written by Diego Colman, Market Strategist for DailyFX. 16th June 2022
 
 
5. SNB Market Recap
 
SWISS FRANC, EUR/CHF, US DOLLAR, SNB, BOE, GBP/USD, BOJ, USD/JPY - TALKING POINTS
  • The Swiss Franc found support post SNB bombshell 0.50% hike
  • Equities remain under pressure as risks swirl from central bank actions
  • With the SNB joining the Fed and BoE this week, will EUR/CHF go lower?
Swiss franc bolts higher as the SNB, BoE join the rate hike party while BoJ  dances alone | IG South Africa

The Swiss Franc is higher as the fallout from the Swiss National Bank’s (SNB) unexpected 50 basis point (bp) rate hike continues.

Jun 17, 2022 | DailyFX Daniel McCarthy, Strategist

 

6. BoJ Market Recap

BOJ MEETING, USD/JPY NEWS AND ANALYSIS

  • BoJ unmoved – maintains dovish policy despite widening rate differentials
  • USD/JPY: Key technical levels analyzed in the wake of the BoJ meeting
  • Major event risk: BoJ minutes, Japan inflation and Jerome Powell speech

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BOJ UNMOVED – MAINTAINS DOVISH POLICY DESPITE WIDENING RATE DIFFERENTIALS
The Bank of Japan (BoJ) announced no change to the interest rate, as expected, and continued to stress that it will “closely watch” the impact of sharp FX moves in relation to its effect on the local economy. The BoJ committed once more to unlimited 10-year JGB purchases to guide the yield towards its zero percent target, by a vote of 8-1.

In essence, the yen is now even less appealing from a fundamental perspective as major central banks like the Fed and Bank of Canada anticipate have hiked aggressively, with the view for more. A widening interest rate differential across the board highlights the greater ‘carry trade’ opportunity as investors and traders may look to borrow the low costing yen in favor of higher yielding currencies like the US and Canadian dollars.

Jun 17, 2022 | DailyFX Richard Snow, Analyst

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All the best - MongiIG

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