- British pound took a quick step back following cautious remarks with respect to rate hikes from Mark Carney
- Japanese inflation comes in well below the BoJ’s aim strengthening the case for keeping monetary conditions loose
- SNB’s Jordan unimpressed with 1.20 on EURCHF
Admittedly, Asian trading did not bring any moves of note across currencies (except for a weakness in the NZ dollar – mainly due to option expiries) the yesterday’s decline in the British pound seems to be worth mentioning. The Great Britain pound made a sudden retreat after Bank of England Governor Mark Carney alluded there are “other meetings” during this year the Bank could lift rates. It roiled the currency sending an explicit message to investors “do not take a May rate hike for granted”. Instead of a clear hint at a rate hike next month Carney offered investors quite muddy clues that the economy is likely to need a few rate increases over the next few years. Concurrently, he did not leave out the latest macroeconomic data acknowledging its softness (labour market, inflation and retail sales). Understandably, the OIS-implied likelihood of a hike in May slipped moderately but it’s standing well above 80% anyway.
Technically the pound may be heading lower in the near-term as the more relevant support might be found nearby 1.40. This place could be a turning point for the currency as it’s underpinned by the medium-term trend line. Source: xStation5
In terms of the data during Asian hours trading there was Japanese inflation for March which came in (again) well below the BoJ’s goal making any adjustments in monetary policy yet more elusive. National CPI totalled 1.1% while two core gauges excluding food (the first one) and food and energy (the second one) turned out to be even more dovish showing 0.9% and 0.5% respectively. In a nutshell, one may conclude that nothing has changed in this respect and it’s remarkably unlikely that something may drive BoJ members to rethink their current stance.
The Swiss franc finally reached its magic 1.20 handle against the shared currency, but this is not expected to be a game changer for the SNB for the time being. As per the latest speech of Thomas Jordan there is still no need for a policy shift despite the notable franc’s slide. Moreover, he said that although the franc’s drop goes in the “right direction” the currency is still considered a haven and the situation “fragile” and prone to change from one day to another. “So we remain very prudent”. Pledging to further monetary easing, mostly due to stubbornly low inflation, Jordan seems to offer a green light for CHF bears. Having said that, the Swiss currency has erased its overvaluation to some extent of late, and therefore the franc could be less prone to continue its decline at such an incredible pace.