![\"\"](\"\/wp-content\/uploads\/2023\/03\/image-162.png\")
<\/figure>\n\n\n\nGBP \u2013 Bailey leads the UK towards the light<\/h2>\n\n\n\n
GBP is about to end the week substantially higher against the dollar and JPY while remaining relatively stable against the common currency, in a sign of a broader strength. On a fundamental note, we highlight that out of the major economies, the UK appears to have borne the least criticism for its banking industry as the news cycle primarily focuses on the US and the EU thus potentially painting a perception of strength in the UK banking sector. On a monetary level, BoE Governor Bailley\u2019s speech on Monday was hawkish in nature as he stated \u201cwhat monetary policy can \u2013 and must \u2013 do is to make sure that the inflation that has come to us from abroad does not become lasting inflation generated at home\u201d. This could be perceived as an indication of the intentions of BoE when they are meeting again on the 11th of May, opening the door to potential further hikes, given also the acceleration of the CPI rates for February. As such we could potentially see inflows into the GBP as a similar rhetoric was echoed by BoE\u2019s Mann, as during a speech she indicated that underlying inflationary pressures would make monetary policy increasingly difficult. Should the BoE officials continue to display such hawkishness we may see a strengthening of the pound. On a macroeconomic level we note UK\u2019s Final GDP for Q4 which accelerated slightly in comparison to the preliminary release indicating that the UK economy has relatively improved and might be entering a period of growth once again yet at feeble levels. On the flip side, any further monetary policy tightening may obstruct economic growth, hence we intend to monitor closely any key financial releases stemming from the UK.<\/p>\n\n\n\n JPY is about to end the week lower than the greenback, common currency and the pound, indicating that the JPY has shown a general sign of weakness as market sentiment returns back to normal. Thus, after safe heaven inflows enjoyed by the Yen during the time of uncertainty in the US markets, JPY now faces outflows. On a monetary policy level, we note that the change in leadership at the BoJ could indicate that new policies may be ushered in, thus upheaving years of ultra-loose monetary settings and translating into potential uncertainty surrounding future policy. We note the statement by BOJ\u2019s new deputy chief Uchida who on Wednesday indicated a willingness to move away from the central bank\u2019s bond yield control policy that saw the frequent intervention of the BOJ in order to stabilize or improve its own currency. As such the potential of less frequent BOJ JGB purchases, could imply that the BOJ is to stop or at least lessen its indirect quantitative easing policy allowing for the Japanese Yen to strengthen. On a fundamental level, we note JPY\u2019s dual nature as a safe haven instrument and a national currency and the possibility of further tensions supporting it, while a further easing of market worries may weaken it. Also, we note the agreement signed between Japan and the US about electric battery raw materials that could open new ways for Japan\u2019s key auto industry. On a macroeconomic level, we note that Tokyo\u2019s CPI rates slowed down for March which tends to foreshadow also a slowdown of inflationary pressures in Japan on a more general level, for the past month. As for economic activity, we note the improvement of Japan\u2019s PMI figure for March of the crucial manufacturing sector, yet also note that the indicators\u2019 reading indicated another contraction for the fourth month in a row.<\/p>\n\n\n\n The common currency was on the rise against the USD, CHF and JPY yet seems to be neutral against the GBP for the week. On a monetary level, we note the Eurozone\u2019s increased CPI for February tended to boost EUR traders\u2019 confidence that the bank is to continue to proceed with further monetary policy tightening, yet the easing of inflationary pressures as recorded by the preliminary PMI readings for March seems to be also easing the pressure on the bank to hike rates. It should be noted that the ECB stated in its last interest rate decision that future policy changes, will now be more data dependent. Given though that the CPI rates are still above the bank\u2019s target, should there be a potentially hawkish rhetoric from ECB officials we may see the common currency getting some support. Overall on a macrolevel, the slight worsening of Eurozone\u2019s business climate and in particular the economic sentiment\u2019s worsening for March tends to intensify our worries for the Eurozone. On a fundamental level, the continued social upheaval in France and strikes in Germany may slow down growth and given that the market discounts such developments in advance may weaken the common currency. Also, we have to note that the recent shake-up of Deutsche bank last Friday send shivers down the spine of EUR traders, yet since then market worries seem to have eased, allowing for calmer thoughts. The situation though tends to remain fragile and requires continuous monitoring.<\/p>\n\n\n\n AUD seems to have remained relatively unchanged against the USD, maybe edging a bit higher as the week draws to a close. On a monetary level, we note that Treasurer Chalmers seeks bipartisan support for an overhaul of the RBA, including proposals to transfer power from the RBA to a new committee of economic specialists and fewer meetings to discuss interest rate decisions, including regular press conferences by the bank governor to explain monetary decisions. We highlight though, RBA\u2019s interest rate decision on Tuesday and the market widely expects the bank to remain on hold. Please note that the bank is expected to stand pat after 10 consecutive rate hikes. Should the bank actually remain on hold as expected, the market\u2019s focus is expected to shift towards RBA\u2019s forward guidance in Governor Lowe\u2019s statement. Should the Governor signal that the bank intends to pause its rate hikes, we may see the Aussie weakening. On a macro level, we note that economic activity seems to have contracted across sectors for March which tends to be worrisome and actually may support the notion of RBA remaining on hold, allowing for Australian businesses to take a breather. On a more fundamental level, a possible deterioration of the US-Sino relationship may weaken it, given the close Sino-Australian economic ties. Especially considering the recent moves of China to conduct its first Yuan-settled LNG trade with a French company and the announcement by Saudi Arabia that its cabinet approved a memorandum awarding Riyadh the status of dialogue partner in the Shanghai Cooperation Organization. On a macro level, we highlight the slight drop of China\u2019s NBS manufacturing PMI figure potentially signaling a slower expansion of economic activity in the sector and thus could imply fewer exports of raw materials from Australia to China. Overall given the low number of high impact financial releases stemming from Australia in the coming week we expect fundamentals to be in the driver\u2019s seat for the Aussie.<\/p>\n\n\n\n Also, the CAD seems to show greatly improved against the USD for the week. It should be noted that Canada\u2019s Manufacturing and employment data for March are set to be released next week. On a macroeconomic level, we highlight the acceleration of the retail sales growth rate for January which tends to imply that the average Canadian consumer is willing and able to actually spend more in the Canadian economy, thus contributing to its recovery. On the monetary front, following BoC\u2019s last interest rate decision to remain on hold we note BoC\u2019s Gravelle statement on Wednesday that the bank anticipates inflation to decrease in the following months, thus solidifying its view to remain on hold, i.e. pausing its rate hiking path. On a more fundamental level, we note that WTI\u2019s price seems to have substantially increased for the week in comparison to last week, given the tight oil market in the US as presented by the weekly drawdowns in US oil inventories but also the possibility of tighter oil supplies from the Iraqi Kurdish area. Should the bullish tendencies for the commodity\u2019s price be maintained, the support building up could be reflected in the CAD given that Canada is a major oil-producing country. Furthermore, on a fundamental level we note as a positive development, Rock Tech Lithium\u2019s new first of it\u2019s kind lithium conversion plant in Germany potentially.<\/p>\n\n\n\n As a closing comment, in the event of no ground-breaking news, we may see the market remaining relatively calm, possibly returning back to normality, despite the situation with the banking sector still bearing a certain degree of uncertainty. Following the prevention of Deutsche Bank experiencing a bank run the market seems to have calmed down the bank crisis rhetoric. In a more general sense, we may see the USD increasing its influence over the FX market as the gravity and frequency of US financial releases tends to increase in the coming week, with the highlight being the US employment report for March next Friday, On the monetary front, we would like to note the upcoming interest rate decision of RBNZ next Wednesday. Currently, NZD OIS imply a 97.8% probability of a 25-basis point hike, which if realised, could support the Kiwi, especially if it’s accompanied by a hawkish rhetoric. In the equities market, seems to have improved especially in the US with a positive overspill in Europe as well. Also, the stabilisation of US yields may allow gold traders to be more optimistic. The negative correlation of the precious metal\u2019s price with the USD was relatively visible this week with minor changes seen in both trading instruments. With the stabilisation of the USD we saw gold remaining also relatively stable as well, as traders await US economic data next week. Nevertheless, the drop below the psychological threshold of US$2000 per ounce at some point during the week could be indicative that the mentality of traders may be shifting, thus we may see the bears take over the precious if US data comes in stronger than expected, supporting the greenback.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/03\/image-163.png\")
<\/figure>\n\n\n\nJPY \u2013 Safe haven outflows for the Yen<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/03\/image-164.png\")
<\/figure>\n\n\n\nEUR \u2013 Fears of Contagion held at bay<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/03\/image-165.png\")
<\/figure>\n\n\n\nAUD \u2013 RBA\u2019s interest rate decision in focus<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/03\/image-166.png\")
<\/figure>\n\n\n\nCAD \u2013 Canada\u2019s employment data at the end of the week<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/03\/image-167.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n