At yesterday’s US FOMC meeting, a 25bp rate hike was announced, as was widely expected. After four 75bp rate hikes in a row, the pace has slowed down to 50bp hikes and now 25bp hikes. Headline inflation is clearly on a slowdown, but the level still requires continued interest rate hikes. It is also a headache that core inflation is persistent. However, in response to the recent outbreak of financial instability, there are concerns about the impact on market sentiment and the economy. FOMC members’ interest rate forecasts remained unchanged. In addition, US Treasury Secretary Yellen has denied guaranteeing all deposits, which also led to a decline in stock prices. In the midst of the general uncertainty, there is a history of yen-buying along with dollar-selling. The dollar index is on a downward trajectory, showing momentum to undo February’s rally following a series of strong U.S. economic data.
Under the circumstances described above, the Bank of England will announce its monetary policy today. Markets are pricing in a 25 basis point hike. However, economists expect a small number of rates to stay on hold. Statements and minutes will be released this time, but no economic outlook or Bailey press conference is scheduled. Market attention is likely to focus on MPC members splitting votes on the policy rate. Tenreiro and Dingula were the two backers of a 50bp hike to 4.0% last time, with a 7-2 vote. There seems to be a mood in the market that wants to see how much the number of people who stay on hold will increase, partly due to the effects of financial instability. On the other hand, the February UK consumer price index announced yesterday unexpectedly exceeded the previous year’s +10.4%. A 50 basis point hike vote would come as quite a surprise, but it seems the possibility remains.
The US dollar is on the verge of selling, partly due to speculation that the end of interest rate hikes is approaching. Today’s aim is to buy NZDUSD or GOLD. I want to go in when the timing is right. Attention will also be paid to the movements of the GBP, which is scheduled to raise interest rates later.