Market wonders: is the RBA next in line?

•     Market wonders: is the RBA next in line?

–    After RBNZ shifts its bias to neutral, it’s natural that RBA might be the next central bank to change its bias at next week’s meeting. AUD falls sharply as a result

–    I think there’s a good chance that they do at least change to an easing bias, which is likely to increase pressure on the currency

•     CHF weakens further; SNB intervention?

–    CHF was the worst-performing G10 currency yesterday. It’s unclear whether it’s because market thinks it’s still overvalued, or because SNB was intervening

–    I think EUR/CHF and USD/CHF can still move higher, although with huge trade surplus, this will depend on Swiss investors moving money out of the country

•     Japan output accelerates but inflation slows further

–    Industrial production rose in December, but the inflation rate continues to slow

–    JPY weakness seems to be their most successful policy. I expect them to stick with it

•     Today:

–    Eurozone: First estimate of Eurozone CPI for Jan expected to fall further into deflation = EUR-negative. Eurozone unemployment & German retail sales for Dec

–    US: 1^st estimate of Q4 GDP expected to show slowdown in growth to 3.0% qoq SAAR from 5.0%; employment cost index, core PCE, final U of M consumer sentiment out