- The Reserve Bank of New Zealand held its monthly policy meeting earlier, deciding to leave its interest rate unchanged at 5.50%, and forecasting only a small chance of a further rate hike, suggesting the terminal rate of the current tightening cycle has already been reached. The Bank also forecasts that New Zealand will enter a recession in Q3 this year. The New Zealand Dollar reacted by rising slightly against other currencies.
- Global sentiment remains generally sour following more concern about China as its stock market continues to fall, with the Hang Seng Index close to a 9-month low, and global stock markets mostly lower. This sentiment was boosted by Fed member Kashkari’s statement that US inflation is “still too high”, raising fears the Fed may hike rates again. This was reinforced by US retail sales data and Canadian monthly inflation coming in higher than expected, suggesting economic activity is still too “hot”.
- The USD/JPY currency pair advanced again yesterday to print a new 9-month high above ¥145.75. This is a result of both Dollar strength and Yen weakness. Trend traders and yield traders will be interested in being long of this currency pair. The Dollar is bullish with rising short-term yields while the Japanese Yen remains one of the weakest major currencies on the Bank of Japan’s ultra-loose monetary policy. However, bulls will be wary that the Bank of Japan may intervene again as it did the last time the price reached this area.
- In the Forex market, the New Zealand Dollar has been the strongest major currency since the Tokyo open, with the Australian Dollar the weakest. The US Dollar continues to look bullish, having just made a bullish breakout above a falling wedge chart pattern.
- Later in today’s New York session there will be the release of the minutes of the most recent FOMC meeting.
- There will be a release later today of UK CPI data, which is expected to show a decline in its annualized rate from 7.9% to 6.7%.