Currencies Ignored But Not For Much Longer

Ian Reynolds March 26, 2023

Currencies Ignored But Not For Much Longer

The Bank of England proudly displays it's monetary policy settings on it's website. Any markets professional looking at it without the current economic context, would be horrified. It's out of control, they'd say.

But right here, right now, we're all meant to be looking for CPI to crash and those short rates to be predicting just such a situation.

In North America, the FED and BoC have at least managed to get rates and inflation onto the same big figure or thereabouts.

Others are also in the Bank of England's situation

Swedish central bank chief says more rate hikes likely due to stubborn inflation

I'm looking for countries where wage inflation gets hold, possibly via union activity and political change, to find possible currency devaluations just about to happen.

Australia is a good example.

A central bank with a change of Governor imminent, Labour Government across all political levels, and union-lead wage increases about to happen.

Rates should be at least 2% higher so that depositors want to put the money in the bank rather than spend it. 2% on top of the cash rate that it.

Banks are currently paying way less than the cash rate and look at the rates below from CBA

Current customers get 2.5% less than new ones. If current customers knew this, they'd be taking their deposits elsewhere.

Key measure of Japan inflation reaches highest level in 41 years [FT]

Continuing price pressures, combined with bigger-than-expected wage increases among large companies, have overshadowed the Bank of Japan’s forecast that inflation is not driven by underlying strong consumer demand and will slow as the cost of imported commodities falls.

So there is a big disconnect between what is happening on the ground now and what is expected in the future. Is this a

Block Shares Sharply Lower on Short Seller Report [Hindenburg Research]

The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.

Deutsche Bank In The Crosshairs [ABC]

Friday night, Germany's Deutsche Bank was in the firing line.

At one point in the trading session, the stock was down 14 per cent, but it recovered to close down 8 per cent.

However, for a major international bank with well over $1 trillion in assets and more than 80,000 employees, even the slightest whiff of trouble at the bank is a source of concern.