February 28, 2024

“A sharp slide in the Kiwi dollar was the most significant move overnight as the RBNZ toned down its hawkish language. US GDP will be the key market driver today, before a packed diary tomorrow jolts the FX markets with German and French CPI, US core PCE, and Canadian GDP.”

Sam Cornford – Head of Trading

Main Headlines

The Reserve Bank of New Zealand held its cash rate at 5.5% and eased its hawkish stance, leading markets to dial back expectations for the peak in rates this year. The statement said that ‘the risks to the inflation outlook have become more balanced’ and played down the probability that it would hike again, although optionality was retained with a forecasted peak of 5.6%. The Kiwi dollar slid 1% overnight.

British Chancellor Jeremy Hunt has engaged in discussions with Shein’s Executive Chairman Donald Tang, with the Chinese-founded fast-fashion chain expressing interest in listing in London, according to a Reuters report. Shein, renowned for offering affordable fashion items across over 150 countries, is considering an initial public offering (IPO) that could potentially become the second largest in the history of the London Stock Exchange. Such a listing would be considered a significant achievement for London, which has recently faced challenges in attracting IPOs and retaining listed companies.

GBP

Sterling has edged down in some cautious trading this morning, broadly following dollar movements in a quiet spot for the UK diary. The BoE’s Ramsden delivered a familiar speech yesterday afternoon, arguing that elevated services inflation is still the key piece of data to watch in terms of when the bank can strike on initiating rate cuts. Strong hawk Mann, who voted for a further hike in this month’s meeting, talks on a panel this afternoon, but the eurozone and US inflation data will provide the catalysts for price action in the pound in the latter half of the week.

EUR

A cautious softening in the euro has been the trade of this morning, with investors gearing up for February’s CPI data from Germany and France tomorrow morning. A smaller-than-expected increase in private lending in January was lost in the focus on the upcoming headline data yesterday, while an empty calendar today will likely see the euro continue drift this afternoon. The expectation is for some soft yearly prints across the bloc tomorrow, although the muddied consensus looks for strong 0.5% and 0.7% month-on-month figures in Germany and France respectively. Elsewhere in Europe, Swiss Q4 GDP growth should come in weak early tomorrow morning at 0.1%, which could pose a threat for a vulnerable franc that has lost over 4% already this year.

USD

The dollar has cast some soft data aside and firmed ahead of GDP data today and core PCE tomorrow. Markets brushed off a sharp 6.1% monthly fall in durable goods and a lower-than-expected consumer confidence print yesterday, with the focus squarely on the more impactful upcoming data. The second estimate of Q4 GDP this afternoon should reconfirm the strength of the US economy, which previously defied the expectations of many to remain strong at 3.3%, as consumptive drivers continued to make US growth a global outlier. The Fed’s targeted inflation gauge – the core PCE price index – will carry the most weight for the market’s implied policy path tomorrow afternoon, though.

Markets

Equities inched up globally in yesterday’s session, but markets are set for a more cautious open this morning as investors ease off ahead of tomorrow’s core PCE data. Some of the largest moves overnight came via a rally in New Zealand government bonds, following a sharp scaling back of expectations for rates this year.

Main Economic Events (All Times CET)

1:30am: Australian CPI
2:00am: Reserve Bank of New Zealand Rate Decision
2:30pm: US Prelim GDP q/q
4:30pm: BoE’s Mann speaks
6:00pm: Fed’s Bostic speaks

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