Today’s minutes did not add much new information regarding the reasons for the rate decision. As indicated by the rate path, the discussion confirmed that 0.25 is not a floor for the repo rate.
Tag: Foreign exchange
Rouble is hovering above 34 against USD and focal points are geopolitics and negative oil market dynamics.
If you are just back from holiday, here are a few bullets on what happened while you were busy…
The USD hovering at a major 1.5y support - break here should bring major new lows; European bad IP data, out this week, already "in the price". Good luck fighting Draghi.
A few hours after voting closed in Indonesia, both presidential candidates declared victory. Quick counts by independent agencies point to Jokowi as the winner, but the margin is no more than 5%-points. Uncertainty will remain until the official announcement on the 22 July. The IDR will likely range-bounce in the coming weeks.
Payrolls not to prevent USD from weakening further, as wages stuck at 2% y/y. Scandies gone too much, too far - inflation on agenda this week.
In light of our change in the EURSEK forecast we also make a minor change to our EURNOK forecast. We still expect the NOK to strengthen but slightly less so.
The Riksbank decision collapsed the SEK but on the other hand it left the Riksbank with considerably less room for further maneuver. It was a decisive action but from here the law of diminishing returns in terms of betting against the krona and further weakening should prove to be marginal. We revise our 3m EURSEK forecast from 8.95 to 9.40 and see a gradual appreciation of the SEK toward 9.10 (earlier 8.60) at the end of 2015.
Following the 50bp rate cut by the Riksbank, down to 0.25%, the deposit rate is now a negative (-0.50%), what implications will it have?
The Riksbank surprised the market by cutting rates by 50bps, which is a historically rare event, in addition, the first full rate hike is pushed out until the end of 2015...
EM FX performance has been mixed since our latest EM FX Monocle, but our call for stronger CEE currencies vs the EUR and modestly weaker Asian and LatAm currencies vs the USD over the summer seems to play out ok so far. The June EM FX Monocle include a short summary of our overall EM FX view and for each of the following currencies: BRL, CNY, CZK, HUF, INR, KZT, MXN, PLN, RON, RUB, TRY and ZAR.
The growth outlook in South Africa recently turned a bad corner, as the economy shrunk by 0.6% in Q1. Meanwhile, inflation continues to rise, leaving the central bank with little breathing room to help activity.
The RON is back below 4.40, but risks are weighing on the outlook. Banking sector risks in Bulgaria, a weak domestic economy and a weakening inflation outlook, and quarrels with the IMF, all suggest that the downside for EUR/RON is limited.
The Turkish central bank continues to gradually cut its main policy rate in an attempt to balance both political wishes and monetary sensibility. This policy is partly warranted, as the lira seems to have stabilised in Q2. However, risks are that the central bank cuts too much too fast.
The so-called waitergate has increased domestic political risks, while the Russia/Ukraine crisis has faded a bit into the background. Markets are taking an increasingly dovish view on the NBP, but much has already been priced in. We still see a gradually stronger PLN towards year-end and higher volatility.
While the RUB is re-gaining some of its lost ground, capitalizing on high oil prices, improving risk sentiment and eased geopolitical tension, the Russian economy faces some problems. The CBR has made another step towards a more flexible rouble.