Yesterday the main event was the budget in the UK. The centrepiece of which was a further 2p cut to national insurance, doubling down on the 2p cut in the previous budget. Jeremy Hunt also unveiled he was ending the current non-dom tax regime and allowing an additional £5k to be saved tax free in stocks and shares ISAs as long as the additional money is invested in British companies. This is expected to be Hunt's final budget pre-election and with the Tories back to the Truss era polling nadir there will be hopes these giveaways can revive the party's fortunes.
Overnight the recent spate of dollar weakness continued. Gold continued to rally and is up at all-time highs near $2160, USDJPY fell to 148 and EURUSD is back above 1.09. There is no clear cause for the USD weakness; Powell yesterday reiterated that although he believes rates have peaked the Fed is in no rush to cut interest rates.
The USDJPY move was aided by data showing wages in Japan rose by 2% in January. Early annual pay negotiation results also point to larger deals this year. Markets now see Japan moving away from negative rates either this month or in April. Eyes are on the March 18-19 meeting amid reports that some BOJ officials favour an early move. At time of writing the overnight swaps market puts the chance of a March hike at 79%.
The Bank of Canada held the overnight policy rate at 5% yesterday. The accompanying statement and press conference struck a hawkish tone. Implied pricing of a cut in April dropped from 8bp to 2bp, while June fell from 22bp to 17bp, and July sits largely unchanged at around 35bp.
Today we have a rate decision from the ECB although the market expects rates to remain unchanged. In the US we have initial jobless claims, Biden delivering the state of the union address and Powell testifying before the Senate Banking Committee.
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