Nothing to see here – 10th May 2017

Nothing to see here – 10th May 2017

The Australian Treasurer’s budget, which he delivered yesterday, had minimal impact on the currency markets and meant that the credit ratings agencies, Fitch and Moody’s, confirmed Australia’s triple-A credit rating.

Despite the possible downgrade to Australia’s credit rating, investors were pretty relaxed. The volatility index, known as “the VIX” is close to its lowest since 1993. Although the VIX strictly relates only to the US S&P500 stock market it also serves as a barometer for financial market sentiment on a broader scale. When it is high, prices are expected to be volatile and when it is low they are not. It is low at the moment, below 10, indicating that investors are considerably less nervous than they were at the height of the global financial crisis when the VIX touched 60.

A symptom of that nonchalance was the lack of exchange rate movement yesterday. Sterling and the US, Canadian, NZ and Australian Dollars were all unchanged against one another. All five though were beaten by the South African Rand which continued its rotation between first and last place for a fourth day.

A smattering of inflation and other ecostats should be enough to keep investors gently occupied between the day’s two main events: appearances by the ECB’s Mario Draghi and the Reserve Bank of New Zealand’s Graeme Wheeler. Both central bank chiefs will have something to say about monetary policy.

Mr Wheeler will be hosting a press conference after the RBNZ announces its rate decision. No change to the 1.75% Official Cash Rate is expected. However, the pick-up in inflation could persuade him to get off the fence and take a more hawkish line. For Sig. Draghi there will be no escape. He is attending an event described by the ECB website as an “Exchange of views with the President on the impact of monetary policy”.