The negative rates era is officially over. The Bank of Japan last night voted 7-2 to end the world's final negative interest rate regime and move the policy rate to 0-0.1%. This move was well telegraphed by the BOJ. USDJPY rose to back above 150 following the announcement despite the hike thanks to the statement which said the central bank expected accommodative conditions to persist for some time and hinted that concurrent rate rises are unlikely. The BOJ offered little guidance as to what comes next, insisting they will remain data dependent for decision making and that there is still some distance from the persistent 2% inflation rate Japan is targeting. At the meeting the BOJ also ended its program of ETF buying.
As we move closer to the Fed on Wednesday the market is adjusting its rate cut expectations. There are now fewer than three cuts priced in for 2024. Expectations reached 67bps yesterday before rising again slightly to 70bps. Attention will be on the dot plot on Wednesday to show whether the Fed have adjusted their own expectations in the face of robust US data.
The Reserve Bank of Australia held rates at 4.35%, a 12 year high, overnight. The Reserve Bank also removed any reference to possible further hikes from the official language, signaling they are done with this hiking cycle. Governor Michele Bullock confirmed they believe they are on track to get inflation back at target within their forecast. AUD fell 0.7% and aussie equities rose on the news.
Oil is holding the recent gains following a rally that kicked off in early Feb, WTI remains above $82.
Today we have Canadian CPI, US housing starts, German ZEW survey of market analysts and ECB VP Luis de Guindos is speaking.
**For professional investors only** Any opinions, news, research, analyses, prices, or other information contained in this blog is provided as general market commentary and does not constitute (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. Some of this information may have been provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation or warranty, expressed or implied, is made or given by or on behalf of iSAM Securities or its directors or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this blog, and no responsibility or liability is accepted for any such information. As a result, any person acting on any information does so entirely at their own risk. iSAM Securities will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.