Central Bank Surprises, Budget Day and an Arsenal Shock
Good morning
For this week, US data releases will be one hour earlier at 12.30 or 14.00 london time due to the clock changes.
In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.
A couple of major surprises overnight, Aussie inflation came in above expectations and the RBNZ decided to leave rates unchanged. As you’d expect, AUDNZD pushed up from 1.2350 to a high around 1.2600 before settling back to the 1.2550 area. AUD has pushed higher against GBP, now 1.8890, while GBPNZD bounced almost 400 points from 2.3420 to 2.3815, as I type it is back to 2.3715.
The RBNZ decision was close, 4-3 in favour of holding rates, and there was a clear message that tighter policy would likely be required, possibly coming as soon as December, with a warning that a weaker NZD could well push inflation higher. Perhaps this move has created a decent NZD buying opportunity. Meanwhile, the Aussie CPI release has made a rate rise by RBA next week even more likely although the surprise RBNZ action may leave some questioning whether RBA could do the same. I’ll have a look for a cheap downside AUDNZD option play just in case.
Elections in Israel seem to result in deadlock with neither party looking like they will gain a majority, no great surprise as I’ve read that no party has ever won with a majority. Natanyahu’s party is still likely to be the largest but whether his coalition can win more than his rival coalition remains to be seen.
I completely missed the English League Cup matches yesterday but awake to see Arsenal have lost to mighty Fleetwood. A massive upset and a great win for the League Two side. Several matches this evening as well including Liverpool v Chelsea and Man City v Brighton, both could be great matches if each side puts out their strongest team.
We are expecting a 25bps rate rise from BoC this afternoon although some major banks don’t agree, preferring to look for a hawkish hold. CAD has weakened so far this week with USDCAD now 1.4060, led by no good news from US/Canada trade talks but with a rate rise not fully priced in I’m wondering if it’s worth looking at a short dated downside USDCAD put, say a one week 1.4025 strike for 30 cad pips or so. Otherwise spend the same sort of premium for the overnight 1.40-1.41 strangle.
Of course, those options also take in the FOMC rate announcement this evening. They are widely expected to leave rates unchanged and we know we won’t get much in the way of comment from Warsh, regardless a hold this month and a raise in December seems to be the most likely outcome for the time being.
We’ll have the UK budget just after midday today, I won’t go inot much detail here, the usual media will do a better job than me of offering views on what will be announced. Still, I have read that they may remove green levies from energy bills, and also remove standing charges from gas bills. Longer-term readers will know that although I understand the price of fuel is dictated by global markets, I have a massive issue with the amount standing charges have risen in recent years. Mine is currently around 30p per day for gas and 52p for electricity. Ridding us of these charges won’t impact my overall bill but for many households it will be a welcome move.
12.30 UK Budget
- 13.45 BoC rate announcement
- 14.30 BoC press conference
- 18.00 FOMC rate announcement
- 18.30 FOMC press conference