The NZD has been the star performer, rising across the board after strong employment data and sustaining that increase. Overnight trading was quiet ahead of the FOMC’s announcement this morning, which ended up the non-event it was widely expected to be.
The FOMC Statement was very similar to the September version, with the changes largely a result of tweaks to language around the Hurricanes. There was recognition that economic activity has been rising “at a solid rate”, despite Hurricane-related disruptions. Inflation excluding food and energy was said to have “remained soft”, a nod to the recent path of inflation despite the stronger economy. Overall, the Statement keeps alive the likelihood of a December rate hike and the market reaction has been muted as I write.
The NZD rose yesterday after employment data were much stronger than expected, driving the unemployment rate down to its lowest level in almost 9-years to 4.6%. Wage inflation showed the expected pick-up, albeit it was inflated by the recent pay equity settlement for care workers. The NZD has hovered around the 0.69 mark since the release, and met some resistance around 0.6930 last night. The strong data obviously squeezed out some short positions, and our view remains that the NZD is oversold, building in an unnecessary political risk premium over recent weeks. We think it can recover further, with next Thursday’s RBNZ MPS a potential domestic source of NZD support.
Outside the recovery of the NZD, the other majors didn’t show much movement both pre and post the FOMC announcement. NZD/AUD met some resistance around 0.9020 and now trades at 0.8985. The NZD is up 0.9-1.0% against GBP, EUR and JPY. The USD TWI majors index has tracked sideways and currently sits 0.1% higher for the session.
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.