25th – 31st Jan 2021 Fundamental Updates & Latest Central Bank Cliff notes

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VIX: $21.91 22/1/21 

Important fundamental releases: 24th to 30th January

  • 7:30pm Tue 26th Jan. AUD CPI
  • 2:00pm Wed 27th Jan. USD FOMC Statement 
  • 8:30 am Thur 28th Jan. USD GDP 

Latest Central Bank statements:

USD FOMC: 16th December 2020

  • Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. 
  • Weaker demand and earlier declines in oil prices have been holding down consumer price inflation.
  • The path of the economy will depend significantly on the course of the virus.  
  • IR: Maintain current rate 0 to 0.25%. Will maintain target range until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and are on track to exceed it. 
  • Will continue QE until the committee outcome has been achieved. 

CAD Bank of Canada Jan 20th  2020

  • Canada’s economy had strong momentum through to late 2020, but the resurgence of cases and the reintroduction of lockdown measures are a serious setback.
  • “First quarter of 2021 is expected to be negative. Assuming restrictions are lifted later in the first quarter, the Bank expects a strong second-quarter rebound”.
  • Stronger demand is pushing up prices for most commodities, including oil. (Bullish(strength) for the currency)
  • Interest Rates: Bank of Canada will maintain its Interest Rate target 0.25%. Will continue their QE
  • A broad-based decline in the US exchange rate combined with stronger commodity prices have led to a further appreciation of the Canadian dollar.
  • Bank is watching CPI numbers to stay between the 1-3% 

CHF Swiss National Bank: September 2020

  • GDP expects to stay below pre covid crisis level, shrink 5% since the start of the crisis. 
  • Inflation: Inflation rate is (-0.6%) expected to edge back to positive. They are paying attention to inflation rate
  • IR: Keeping interest rate at -.075%
  • Willing to intervene more strongly in the foreign exchange market. 

GBP Bank of England Nov 5th 2020 

  • Inflation target at 2%
  • Will maintain bank rate at 0.10%
  • Will continue their version of QE
    • Will increase UK government bond purchases by an additional 150Billion Pounds to meet inflation target in the medium term. 
  • SIgns that consumer spending has softened across a range of indicators & investment intentions have remained weak. 
  • Household spending expected to pick up in 2021 Q1 as covid restrictions loosen. 
  • Outlook of the economy remains unusually uncertain. 
    • depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom.

JPY Bank of Japan Jan 21st, 2020

  • Decided to  follow yield curve control
    • Interest rates will remain at -0.10%
    • Will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around 0%. 
  • WIll continue their version of QE (buying Japanese government bonds) for another 6 months until September 2021.
  • The Bank will be monitoring if the CPI exceeds 2% and stays above the target in a stable manner.

EUR ECB Dec 10th, 2020

  • Will maintain Interest rates at 0.00%
    • Will remain at this level until the Governing council sees inflation outlook get close to but below 2% within their projections. 
  • Increase their PEPP by 500 Billion Euros 
    • Will extend this program until March 2022 and/or it determines that the coronavirus crisis phase is over. 
    • Inflation goal of 2% ceiling. Will keep interest rates unchanged  at 0.00%, 0.25% and -0.50% respectively. ECB will continue its PEPP – Pandemic emergency Purchase programme. Asset purchase program will continue at 20billion euro per month. Will end shortly before increasing interest rates* 

NZD: RBNZ November 2020

Employment : maximum sustainable employment

  • Will continue their QE program for a long time, and prepared to give more support 
  • Restrict high risk lending in housing market
  • Leave interest rates at current level .25%
  • Keep inflation between 1% & 3% 

AUD: RB Of Australia 1/12/20

  • Will maintain interest rates at 1%. Given the outlook, is not expected to increase for at least 3 years. 
  • Will continue their QE
  • Australia’s economic recovery is under way and recent data have been better than expected. 
    • GDP would not reach its end of 2019 levels until the end of 2021. 
    • GDP expected to grow around 5% 2021 and 4% over 2022
  • Inflation forecast to be 1% in 2021 and 1.5% in 2022. 
  • RBA will focus on addressing the high rate of unemployment. 
  • The Bank’s policy response has lowered interest rates across the yield curve, which will assist the recovery by: lowering financing costs for borrowers; contributing to a lower exchange rate than otherwise; and supporting asset prices and balance sheets.

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