RBA walk fine line
The dilemma of the central banker was voiced quite openly by the Reserve Bank of Australia overnight. The minutes from their last meeting, released early this morning, show the balancing act between understanding that the property market is becoming over heated due to an extended period of low interest rates whilst accepting that, to raise rates would be damaging to the overall economy. Central bankers dance along this fine line at the best of times but these are very unusual circumstances and the margins for error are finer than normal. The GBPAUD rate was largely unmoved because the minutes didn’t reveal any change of policy. GBPAUD starts Tuesday at AUD 1.8445.
NZ Dollar makes strong gains on inflation data
The big mover overnight has been the New Zealand Dollar. GBPNZD is down to just above NZD 1.93 this morning after a 3.5 cent drop in just 6 days. This rate hasn’t been so low since 10th May. Seeing New Zealand’s consumer inflation at 4.9%; the fastest pace in 10 years, took a day to sink in but when traders twigged the news, the NZD gained strength across the board. The main reason for the strength is that many now believe the Reserve Bank of New Zealand will raise their base rate by 50 basis points before the end of the year.
We we’ll have a speech from the Bank of England governor, Andrew Bailey early this afternoon. The UK is in a not dissimilar situation to Australia, in as much as inflation remains high and, while certain sections of the economy are doing rather well, UK PLC is not out of the woods yet. However, a report from Santander shows 73% of UK businesses are confident about their growth prospects. That’s so good to see. Sterling is also benefiting from the weaker US dollar. The GBPUSD rate Is up to $1.3775 this morning. The Pound also remains strong against the Euro. That pair is holding station at €1.1825, just above the previous ceiling of €1.800.
The central banker theme continues through the day, with three members of the European Central Bank making speeches today along with a member of the Bundesbank council. We lack hard data from the eurozone though. The weaker U S dollar does come into play though in the EURUSD rate. This pair has gained 3/4 of a cent since yesterday and starts Tuesday at $1.1650.
US traders poised for housing market data
The rest of the afternoon is also awash with central bankers. We have no less than 4 speakers from the various Federal Reserve districts alongside US housing market data which might be influential. We have seen the numbers of new house starts and building permits falling of late. If the market forecasts are accurate that trend will continue in today’s data and add to the weakness of the US dollar.
Canada’s business optimism – best on record
The Bank of Canada’s business outlook indictor delivered the highest level of optimism on record in Q3 despite concerns over supply chain delays and shortages. The survey revealed at many businesses expected those constraints to continue through the first half of 2022. That is a sentiment mirrored in other countries. So, whilst this is great news for Canada, the Canadian Dollar only made marginal gains and GBPCAD is sitting at CAD 1.6990 this morning.
But none of this is as important as the fact that this is International Gin and Tonic day! Byeee.