Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Sweden takes lead in Eurovision rate cut contest
Global FX markets have recently calmed after the flurry of activity following last week’s dovish Federal Reserve decision and weaker jobs report that saw the US dollar sold off.
The US dollar has reclaimed around half of last week’s losses.
Overnight, the greenback was higher, if only moderately, with the USD index up 0.1%.
The Aussie and the Japanese yen were the weakest with AUD/USD down 0.3% and USD/JPY up 0.5%.
The main news came from the Sveriges Riksbank – the Swedish central bank – that followed the Swiss National Bank as the second major G10 central bank to cut interest rates cut this year. The Riksbank cut official rates from 4.00% to 3.75% despite inflation, most recently at 4.1%, above the Riksbank’s 1.0% – 3.0% target.
The USD/SEK gained 0.5% as the Swedish krona fell.
BoE cautiously dovish amid rate cut expectations
The Bank of England decision is due tonight and we don’t anticipate any changes to the Bank’s voting or policy levers.
We would not be shocked to see some more subtly dovish remarks, either in the statement/minutes or orally during the press conference, even if the Bank’s guidance’s main points are probably going to be kept. For now, markets are only completely pricing for the first 25bp cut by September, opening up the risk for downside if the BoE cuts quicker than expected – especially if it cuts faster than the Fed.
The GBP’s been recently weaker as market expectations grow for BoE cuts. The GBP/USD is around 1.5% from six-month lows while the AUD/GBP is near four-month highs.
BNM to hold steady with growth and inflation outlook balanced
We anticipate that Bank Negara Malaysia (BNM) will maintain the overnight policy rate (OPR) at 3.0% when the decision is announced at 3.00pm local time (5.00pm AEST).
BNM will continue to cite that growth and inflation outlooks are developing as anticipated, supporting the maintenance of the current monetary stance, which it still views as supportive of the economy.
Additionally, the policy statement should maintain its previous tone. The Q1 GDP flash estimates indicate that economic momentum is steadily increasing, driven by increased export growth and consistent with BNM’s predictions; nonetheless, BNM may include geopolitical issues in its list of downside risks.
Given that the trade balance is under pressure and is still declining, the outlook for MYR remains more negative.
British pound weaker ahead of BoE
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 April – 3 May
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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