Currencies

The pair faces difficulties this week, with mixed Eurozone inflation figures blurring the monetary policy outlook ahead of the decisions by the US Fed and the European Central Bank

The Reserve Bank of Australia stunned markets by restarting its rate hike cycle today, sending the pair higher, but the upcoming policy decision by the US Fed looms

The central bank of Australia raised rates by 25 bps against market expectations for another hold, while keeping the door open to further tightening

In the first meeting under new Governor Mr Ueda, the BoJ stood pat on its easy policy setting, but tweaked its forward guidance and upgraded its inflation forecast

Watch today’s US Open for commentary on the strong quarterly results by tech heavyweights, the persistent fears over the health of the financial system, the latest GDP figures from the US and more

Today’s data showed that CPI inflation moderated to 7% y/y in the first quarter in Australia, not long after the country’s central bank had paused its year-long rate hike cycle

Watch today’s US Open for commentary on the upcoming Big Tech earnings, the renewed banking jitters, the latest ECB-speak and more

There is an air of uncertainty, with participants unsure of what comes next for markets. A large part of this is that markets are hesitant of how Fed monetary policy plays out and are looking at Q1 GDP and core PCE for direction (released Thursday and Friday at 12:30 GMT).

Given the lag on the EU inflation front, the ECB will need to be more aggressive than the Fed for at least the medium term. This is reflected in the spread between the German (proxy for EU) and US 2-year notes. This is because short-term borrowing costs react quickly to changes in monetary policy.

Watch today’s US Open for commentary on the quarterly results by Netflix and Tesla, the higher than expected UK inflation, its deceleration in New Zealand and more

Yesterday saw a higher-than-expected average earnings index (3m/y) out of the UK at 5.9% (vs 5.1%-forecast). Today inflation has proved persistent with headline CPI (y/y) at 10.1% (vs 9.8%-forecast) and core CPI (y/y) at 6.2% (vs 6.0%-forecast). This suggests at least another 25bps hike from the BoE in May.