The NZDUSD opens lower at 0.8705 this morning.
Yesterday's Q2 CPI release was on the soft side (+0.3% Q/Q & +1.6% Y/Y versus +0.4% & 1.8% forecast). This, along with the terrible Fonterra global dairy auction, caused a sharp sell-off in the NZD across the board as the market re-rated the probability of future NZ interest rate hikes.
The USD rose broadly as the markets speculate the US Fed is beginning to lean towards tightening monetary policy sooner than previously anticipated. Dallas Fed President reinforced this view when he stated the central bank is likely to start raising interest rates gradually early next year. This has helped to pull the NZDUSD lower.
Many market commentators are now saying the RBNZ will either not raise rates next week, or if they do, the bank will signal that it will be the last one for a considerable period.
Global equity markets were mostly higher on the day - Dow +0.5%, Nikkei -0.1%, Shanghai -0.2%, FTSE+1.1%, DAX +1.4%
Gold prices rebounded slightly to USD$1297. Oil prices fell by 0.2%.
The current indicative mid-rates are:
NZDUSD 0.8705
NZDEUR 0.6440
NZDGBP 0.5080
NZDJPY 88.55
NZDAUD 0.9300
NZDCAD 0.9360
There is no data scheduled on the domestic calendar today.
US Building Permits, Weekly Unemployment Claims, and Philly Fed Manufacturing Index all hit the tapes tonight.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »
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