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.

 

EUR/USD

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

 

USD/JPY

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

 



GBP/USD

Supports 1.7060 1.7049 1.7031 | Resistance 1.7095 1.7106 1.7123

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.