Kay Van-Petersen
Saxo's global macro strategist Kay Van-Petersen examines the big issues for the markets including AUDUSD, potential US-China trade war and interest rates.
Article / 22 January 2014 at 8:31 GMT

BoE minutes, BoC rate decision on tap

Head of FX Strategy / Saxo Bank

• Surprise rise in Australia CPI likely to be blip
• BoJ says inflation set to stay at 1.25% 'for some time'
• BoE minutes may reveal some concern on GBP strength

By John J Hardy

I’m not sure what to make of Australia’s high CPI data released overnight, which doesn’t fit with the generally lower inflation we’re seeing in the rest of the world. The higher levels are likely at least partly due to a bit of shock from a sharply weakening currency. In an economy with plenty of signs of slack, this is likely a one-off blip in higher inflation data and I don’t see this data point triggering any Reserve Bank of Australia concerns or a sustainable rally in the currency. Still, short AUD positioning is rather heavy and this data release shows how sensitive AUD pairs are to data that surprises “the wrong way”. Elsewhere, a very negative MNI business sentiment survey out of China (dropped to 52.2 from 58.4 in December and the lowest since 51.8 in September, though it is a rather jumpy survey) provides some ammunition for the AUD bears.


AUDUSD is not following through lower after the break to new lows for the cycle. The ideal resistance came in at the previous lows around 0.8820, but that was handily taken out overnight. Considering the steepness of the recent descent, we might need to allow some slippage towards 0.8900 and more before worrying that a full scale reversal of the down-trend is unfolding.


No surprises from the headlines in the wake of the Bank of Japan meeting overnight, though a change in the BoJ’s statement suggests some concern that inflation levels will fail to continue to rise for some time as the statement now says that inflation is likely to be around 1.25 percent for some time rather than “likely to rise for the time being.” Governor Haruhiko Kuroda is speaking as I write, generally expressing a positive outlook and saying that the bank is not targeting weak or strong yen and that the BoJ can reach its price target in the late financial year of 2014 (which stretches to end of March 2015) or in 2015.


If Japanese inflation holds steady at 1.25%, vendors at Tokyo's famous Tsukiji fish market won't be changing those price tags too often. Photo:

Looking ahead

This morning we see a bit of UK jobless claims and earnings data, as well as the more important Bank of England minutes, which are more important than other central bank meeting minutes because the Bank of England rarely releases a policy statement on the day of its policy announcements. Among other focal points, watch out for any rhetoric expressing concerns on the level of the currency now that it is at the top of the longer-term range against both the euro and the US dollar. As well, the market will look at how MPC members are emphasising that they would rather focus on macro-prudential, rather than interest-rate measures to reduce, for example, the risk (reality?) of a new housing bubble. I’m also curious to see the degree to which members bring up what I see as the true elephant in the room that no one is talking about — the UK’s massive current-account deficit.

The Bank of Canada meets today. It has made a very loud pivot in a dovish direction in recent meetings, and a very weak employment report in December, together with a few other soft data points — including a terrible Ivey PMI in December —suggest that the bank’s new policy statement and Stephen Poloz’ press conference should be thoroughly dovish. The question is whether the dovish outlook from the BoC is priced in for the near term after the currency’s rather spectacular plunge in recent weeks. Traders may look to fade any signs of near-term USDCAD weakness in the wake of this meeting as CAD is likely set to fall further this year.

The US data calendar is very quiet this week and will remain so until tomorrow’s latest weekly claims data. The only other calendar item of note is Friday’s Existing Homes Sales data point. Next week is FOMC week and the handover of the Fed chairmanship baton to Janet Yellen.

Economic data highlights

  • Australia Jan. Westpac Consumer Confidence Index out at 103.3 vs. 105.0 in Dec.
  • Australia Q4 CPI out at +0.8% QoQ and +2.7% YoY vs. +0.4%/+2.4% expected, respectively and vs. +2.2% YoY in Q3
  • Australia Q4 Trimmed Mean CPI out at +0.9% QoQ and +2.6% YoY vs. +0.6%/+2.3% expected and vs. +2.3% YoY in Q3
  • Japan Bank of Japan left Monetary Base Target unchanged at ¥270T as expected

Upcoming economic calendar highlights (all times GMT)

  • UK Dec. Jobless Claims Change (0930)
  • UK Nov. Employment Change (0930)
  • UK Bank of England Minutes (0930)
  • Switzerland Jan. Credit Suisse ZEW survey (1000)
  • Sweden Riksbank’s Jansson to Speak (1100)
  • Canada Bank of Canada Rate Meeting (1500)
  • Canada Bank of Canada’s Governor Poloz holds Press Conference (1615)
  • UK Bank of England’s McCafferty to Speak (1830)
  • New Zealand Dec. BusinessNZ Manufacturing PMI (2130)
  • New Zealand Jan. ANZ Consumer Confidence (0000)
  • China Jan. HSBC/Markit Flash Manufacturing PMI (0145)



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