BoJ raises rates to highest level since 1995

Good morning

BoJ raised rates 25bps to 1% overnight as widely expected.  1% doesn’t sound like much but it is the highest Japanese rates have been since 1995, pretty much when I started in the FX world.  Additional rate rises are not out of the question but timing and pace of adjustments is unclear but likely to be slow.  We’ve seen little impact in the currency markets with USDJPY 160.30 and GBPJPY 215.00. 

RBA decided to keep rates unchanged at their meeting in the early hours of this morning.  The door remains open for a rate rise in the coming months if appropriate but the bar will be quite high, particularly if we do get the US/Iran peace deal and if oil prices continue to remain subdued.  Again, the event was well telegraphed and as a result market impact was limited.  GBPAUD bang on 1.9000 as I type. 

That US/Iran peace deal remains in the headlines as we wait to see whether it will be signed, and then of course how well both sides adhere to the agreement.  Much hinges on Iran’s nuclear plans and whether it will give up its enriched uranium, if it does there is a decent chance they will unlock a huge $300bn reconstruction fund.  After all the fighting, it would seem the US are buying Iran’s uranium. 

US are still on the attack when it comes to trade with the EU, with Trump threatening a 100% tariff on French wines if Macron keeps the digital tax on US firms.  Meanwhile, EU’s Juncker has said a UK return to the EU is unlikely given the upset and resentment caused by us leaving, plus some unhappiness over our closer ties with the US.  Probably a bit short-sighted.  EU are however starting the membership process for Ukraine.    

I watched a bit of the Spain v Cape Verde world cup match yesterday which ended is a 0-0 draw, disappointing for Spain but wildly exciting for Cape Verde fans who, with a population of just around 500,000 have punched well above their weight.  Belgium only managed a draw against Egypt, while Iran and New Zealand also battled out a 2-2 draw overnight.  France take on Senegal this evening, England will play Croatia tomorrow evening.

A fairly quiet calendar today but tomorrow will be livelier with UK inflation early in the morning, US retail sales in the afternoon and the FOMC rate announcement later in the evening. 

Have a great day…

-  10.00 German ZEW

-  11.55 ECBs Escriva speaks

-  13.15 US ADP 4 week average

-  13.30 US housing starts

-  14.10 ECBs Lane speaks

-  20.05 ECBs Sleijpen speaks

-  00.50 Japan trade

-  07.00 UK CPI, PPI, RPI