RBNZ signals a pause

<p>The NZD took centrestage in the FX space overnight, following what can be described as a dovish rate hike by the RBNZ. The central bank […]</p>

The NZD took centrestage in the FX space overnight, following what can be described as a dovish rate hike by the RBNZ. The central bank raised the OCR by 25 basis points to 3.5%, taking the adjustment to a normalised policy of 100 basis points. Central Bank Governor Wheeler then added two key points to his statement that sent the NZD 100 points lower. The market now predicts a period of monetary policy stabilisation. He said that the ‘level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall.’

Encouragingly, the economy appears to be adjusting to the monetary policy tightening that has taken place since the start of the year. It is prudent that there now be a period of assessment before interest rates adjust further towards a more neutral level.

The AUD’s fortunes were in contrast across the Tasman Sea from New Zealand following a strong economic reading from China. The Chinese flash PMI for manufacturing came in at a fresh 18-month high at 52 versus the consensus forecast of 51 and despite a solid trade balance of NZD247 million versus the NZD100 million expected, the AUD/NZD price is still trading above 1.10 in early London trading.

The proud pound (or not so this week) will be the data focus this morning as the UK gauges the effects of its dismal world cup campaign with the release of retail sales data. The US session will bring us market PMI data along with new homes sales. This will again gain extra focus following the expressed concerns from Fed Chair Janet Yellen with regards to the housing market recovery in the US.



Supports 1.3430-1.3400-1.3350 | Resistance 1.3480-1.3500-1.3515



Supports 101.40-101.20-100.75 | Resistance 101.70-102.00-102.30



Supports 1.7060 1.7049 1.7031 | Resistance 1.7095 1.7106 1.7123

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