Australia February Monthly CPI Indicator First Impressions

The February print was a softer than Westpac’s forecast of 3.8% and the market median forecast of 3.5%yr. Taken at face value, the February Monthly CPI Indicator suggests that if there are any risks to our current March quarter CPI forecast of 0.7%qtr, it is to the downside. However, the quarterly CPI is not a simple average of the Monthly CPI Indicator and history has taught us that a simple ‘face value’ estimate can be misleading.

NZ First Impressions: Budget Policy Statement Review

In addition, the Treasury is now also forecasting a lower trajectory for inflation. With CPI inflation expected to be close to the RBNZ’s 2% midpoint by the middle of next year, the forecast for nominal GDP is significantly lower across the forecast horizon – indeed by a cumulative $42.8bn – implying a markedly smaller tax base.

Further Yen Losses Avoided as Fin Min Suzuki Warned

Further yen losses were avoided as Fin Min Suzuki warned that they are watching market moves with a high sense of urgency and that they will take bold measures against excessive moves. Intervention fears pushed USD/JPY back to the 151.7 area.

Crypto Market: A Breather After the Climb

Bitcoin has fallen back below $70K, which can be attributed to the bulls’ need to let off steam and the general decline in risk appetite in global markets. The short-term focus for traders will be to see if Bitcoin can retest Tuesday’s intra-day lows near $69.5K. A break below this level could signal a more protracted correction.

USD/JPY Slides to Lowest Level Since 1990

The Japanese yen has edged higher on Wednesday. In the European session, USD/JPY is trading at 151.17, down 0.26%.

USDJPY Eyes 1990 Highs: Intervention or Reversal?

The USDJPY rose to 151.97 on Wednesday morning, seven pips above the November 2022 high and four pips above the October 2022 high, when intervention reversed the rate sharply. Wednesday’s high was the highest since 1990.

Cliff Notes: Opinions on the State of the Economy

This week, Westpac surveys provided insight into both the current conditions and outlook faced by consumers and manufacturers. The Monthly CPI Indictor and job vacancies subsequently provided more evidence of the persistence of Australia’s disinflationary trend.

Something Must Give

Either the US dollar should weaken because the Fed is expected to cut three times this year with the first cut due in June - in which case we could continue to see the stock market laggards catch up with the leaders of the past quarters and capital to flow into the other-than-tech sectors as well. And in case of policy easing – as predicted - appetite should also broaden to small and mid cap stocks, to EM funds and to commodities.

A New World Imagined by BoJ, But Not Yet Realised

At their March meeting, the Bank of Japan raised its policy rate to the range of 0% – 0.1% having “assessed the virtuous cycle between wages and prices” and judged “that the price stability target of 2 percent would be achieved in a sustainable and stable manner toward the end of the projection period”. The BoJ continues to view their stance as accommodative.

All Eyes on the Fed

In the US today's main event will be the FOMC meeting. The Fed is widely expected to maintain monetary policy unchanged. Focus will be on any clues about the timing of the first rate cuts as well as the end-game for QT, which the Fed agreed to discuss in more detail at today's meeting. The Fed will also publish its updated rate and economic projections. For more details, see Fed preview, 15 March.