Jeremy Stretch, Head of G10 FX at CIBC, speaks on central banks, rate cuts, and why there isn’t any risk of a total run on the pound, joined by Alessio Rastani, Director at Leading Trader, and Zak Mir, Analyst at Zak’s Traders Cafe.
Highlights:
“RBNZ rate cut – Markets were fully anticipating a 25-basis-point rate cut. Many actually expected a aggressive action.. hence the decision ended up strengthening the kiwi.”
“The whole game of interest rate cuts could end.. as central banks are slowly realising that the negative rates are backfiring. In fact doing nothing or leaving expansionary may have proved to be a better strategy. However, for RBNZ there is still room for further rate cuts as inflation is low, but they need to keep an eye on property market heating up.”
“Risk of a total run on pound – there isn’t such a risk. Question is what will be the next catalyst for a fresh sell-off in pound. Markets believe BOE would do more expansion of its balance sheet so it could trigger some fall. Further bearish pressure could come as we move from survey data due to actual data – retail sales, trade balance, industrial production, labor data. So Cable could go down to 1.25, but don’t see capitulation of pound.”