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Forex Today: Dovish RBNZ Sends Kiwi Lower

The Reserve Bank of New Zealand gave a more dovish policy statement on inflation, sending the Kiwi lower, as global stock markets remain bullish in the face of declining global inflationary pressures.

  1. The Reserve Bank of New Zealand held its Official Cash Rate at 5.50% as expected but struck a more dovish note in its statement by saying that it had greater confidence that inflation is coming under control. This sent the New Zealand Dollar lower, with the NZD/USD currency pair moving nicely today as the US Dollar strengthened.
  2. We saw stock markets continue with their bullish moves to new record highs. This bullishness has followed right through today’s Asian session, with stocks trading near their highs approaching the Tokyo close. We are seeing new all-time high prices in the NASDAQ 100 Index and the broader S&P 500 Index. Most global equity indices are bullish, with Japan again the standout today as the Nikkei 225 index has risen very strongly to close at a new record not far from 42,000. The Japanese TOPIX has also risen today to trade at a new all-time high. These are bullish signs for equities and trend traders will want to be involved here on the long side.
  3. Fed Chair Jerome Powell testified yesterday about the Semi-Annual Monetary Policy Report before the Senate Banking Committee. The testimony was widely seen as neutral and had little effect upon the US Dollar. Powell stated that he wants more evidence of falling inflation before proceeding with a rate cut. Of course, major US indices rose to new record highs following his comments. Treasury Secretary Yellen echoed Powell’s earlier comments to the effect that the labour market is no longer driving inflation.
  4. Fed Chair Powell will be testifying before the House of Representatives later today.
  5. In the Forex market, the Australian Dollar is the strongest major currency since the Tokyo open, while the New Zealand Dollar is the weakest, putting the AUD/NZD currency cross in focus. The US Dollar lost quite heavily last week but is gaining this week after having approached near to a support level and remains within a valid long-term bullish trend.

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