INDIA: RBI Minutes Shed Light on Discussions Over Central Bank Stance
Oct-15 11:42
The RBI have released the minutes from its latest rate-setting meeting. As a reminder, the central bank kept rates on hold in October, noting that inflation is likely to be softer than what was projected in the August MPC. The MPC also decided to retain the stance at neutral, though members Kumar and Singh were of the view that the stance should be changed to accommodative. Highlights from the minutes:
- Kumar: “I vote for keeping the repo rate unchanged at this juncture but feel that the stance could be changed to accommodative.”
- Kumar: “We may like to signal the readiness of monetary policy to support the industry, investments and growth by changing the stance from ‘neutral’ to ‘accommodative.’”
- Singh: “A change in stance to accommodative increases the odds of a rate cut in this easing cycle.”
- Singh: “Furthermore, an expectation of a rate cut will likely put downward pressure on bond yields […] Yet, the accommodative stance gives the RBI flexibility to delay or hold back on further cuts in the event of unexpected developments in food prices or on the external front.
- Malhotra: “I prefer to retain the neutral stance as any change to an accommodative stance at this stage, as suggested by some members, would tantamount to giving a definitive forward guidance about the future trajectory of the policy rate.”
- Bhattacharya: “Taking into account the fluidity of the macro-financial environment, I vote for a pause in monetary policy decision on the repo rate and for the same reason I believe that stance quo on the stance is appropriate at this point.”
- Gupta: “Given the heightened global uncertainty, it may not be possible to confidently commit to a new stance. Hence, I consider it prudent to retain the stance at neutral.”
See the full release here.
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ECB: Familiar Themes From Schnabel's Slides
Sep-15 11:34
ECB Schnabel's slides presented at the EIB's Chief Economist's meeting are here
Key messages are well in line with Schnabel's previous comments:
- "Interest rates are in a good place as inflation stabilises around our 2% target and the economy remains resilient at full employment"
- "Healthy balance sheets, lower uncertainty and fiscal expansion underpin domestic demand, counteracting a decline in net exports"
- "So far little evidence of China dumping exports, while the pass-through of a stronger exchange rate is likely to be limited"
- "Upside risks to inflation dominate, with tariffs, services inflation, food inflation and fiscal policy as potential drivers"
- "Monetary policy should keep a steady hand, tolerating moderate deviations from target"
FOREX: GBPUSD Extending Bounce Above Key Bull Trigger
Sep-15 11:29
- Bullish conditions for GBPUSD have been bolstered this morning, following the break of the bull trigger located at 1.3595 (Aug 14 high) which places the pair at two-month highs. The rally that started Sep 3 has retraced the steep Sep 2 sell-off, suggesting the corrective cycle between Aug 14 - Sep 3 is over. Immediate resistance is found at 1.3636, the 76.4% retracement of the Jul 1 - Aug 1 downleg, before 1.3681, the Jul 4 high.
- ING comment that the travails of the UK Labour government have not dented appetites for the high-yielding pound. They think EURGBP looks comfortable in its 0.86-0.87 range, while GBPUSD could break above resistance at 1.3590/3600 this week if the Fed is sufficiently dovish.
- Official labour market data headlines Tuesday’s calendar, expected to continue to show mixed signals. 3m/3m employment is expected to increase by over 200k again in the 3-months to July while the flash monthly payrolls print is expected to modestly decline by around 11k in August.
- UK CPI data and the BOE decision also take place this week, placing a heightened amount of attention on sterling this week.
EURIBOR OPTIONS: 97.5625 Calendar Spread Still Trading
Sep-15 11:18
ERH6/ERM6 97.5625 put calendar spread, paper pays 0.75 for 3k all day
