By Kymberly Martin
The USD has declined against most of its peers. The NZD and AUD have been beneficiaries, but the strongest performer has been the NOK.
In the backdrop of modest negative returns from equity markets and a 1.8% decline in the WTI oil price, the USD has continued to trade a generally declining trend since yesterday morning.
The market remains reluctant to price further Fed hikes any time soon. Only 11bps are priced by the end of the year.
Meanwhile the NOK has been the strongest performer over the past 24-hours. It gapped higher on the release of Norway’s July CPI data last evening. This showed core inflation well above expectation at 3.7% y/y. This is a rare upside surprise for inflation data globally, though Norway’s series has been tracking steadily higher since 2013. The NOK has risen about 1.7% against the USD, to trade at 8.2640 this morning.
The beleaguered GBP was one of the few major currencies unable to hold onto any gain versus the USD overnight. The GBP/USD traded above 1.3080 early this morning but has subsequently slumped back to 1.3000.
The JPY strengthened yesterday morning before consolidating overnight. The USD/JPY continues to flirt with the bottom of its post-‘Brexit’ range. It trades at 101.30 currently.
The NZD/USD has traded higher over the past 24-hours. However, it was unable to push on from the early hours of this morning. It poked its nose above 0.7260 before returning to 0.7230 currently.
The market now awaits the RBNZ. It more than fully prices a 25bps cut today. It prices a total of almost 70bps of OCR cuts within the year ahead.
Therefore if the RBNZ delivers a 25bps cut today but the market does not view its commentary as sufficiently dovish, the NZD/USD could experience a knee-jerk bounce.
Even if the RBNZ were to deliver a 50bps cut today (not our central view) we are doubtful it would have an enduring dampening effect on the NZD/USD.
Rather, relative economic fundamentals, global risk appetite and evolving expectations for the US Fed will likely remain dominant drivers.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
BNZ Markets research is available here.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.