The Reserve Bank of New Zealand conveyed a rate hike to its policy meeting as expected, forecasting only a small chance of a further rate hike and a recession from the third quarter onwards.
➡️ 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 rise, suggesting that the terminal rate of the current cycle tightening has already been achieved. The Bank also expects New Zealand to enter recession in the third quarter of this year. The New Zealand dollar reacted by rising slightly against other currencies.
➡️ Global sentiment remains generally sour following heightened concerns over China as its stock market continues to fall, with the Hang Seng Index near a 9-month low and global stock markets mostly lower. This sentiment was reinforced by Fed member Kashkari's statement that US inflation is "still too high", raising fears that the Fed may raise rates again. This was reinforced by US retail sales data and Canadian monthly inflation which is higher than expected, suggesting that economic activity is still too “hot”.
➡️ The USD/JPY currency pair advanced again yesterday to print a new 9-month high above 145.75 yen. This is the result of both the strength of the dollar and the weakness of the Yen. Trend traders and return traders will be interested in being Long this currency pair. The dollar is bullish with rising short-term yields while the Japanese yen remains one of the weakest major currencies in the Bank of Japan's ultra-loose monetary policy. However, bulls will be wary that the Bank of Japan might 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 declining wedge chart pattern.
➡️ Later in today's New York session will be the release of the minutes of the most recent FOMC meeting.
➡️ There will be a release later today of the UK CPI data, which is expected to show a decline in its annualized rate from 7.9% to 6.7%.
Credit by DailyForex.com