NZ base rate on hold but rises coming soon

The New Zealand Dollar lost a cent against the Pound in the last 24 hours. The Reserve Bank of New Zealand had been expected (by many commentators) to raise interest rates by 25 basis points when they met early this morning (UK time). That didn’t happen. They left their base rate on hold at 0.25% but did hint that interest rate rises would be coming fairly soon. Their forecasts showed the cash rate above 0.5% by the end of 2021 and above 2% at some point in 2024. GBPNZD starts the day at NZD 1.9830; still shy of the mythical NZD 2.00 but the highest level in a fortnight.

Interestingly, the Australian Dollar has moved the other way. The GBPAUD rate, which peaked near AUD 1.89 overnight, is ¾ of a cent lower this morning after a 1.7% annual rise in the Aussie wage price index. That wasn’t quite as bullish as many had predicted but it is progress nonetheless.

Yen stronger after machinery and imp/ex data

The other overnight news was from Japan. Strong machinery orders and import/export data showed that Japan was in good shape in July. The cautionary note is that further pandemic problems will affect these figures for August. Nevertheless, the GBPJPY rate is nearly 3 yen lower on the week. That pair starts the day at JPY 150.60.

For its part, Sterling has been pulled back by slightly less than expected inflation data. The headline annual consumer price index is up 2.0%; bang on the Bank of England’s target rate and therefore it represents no threat of higher interest rates at the moment. Sterling will undoubtedly strengthen if the yield from Sterling bonds rises. When that will happen is the big debate, as it is for most currencies and central banks. GBPEUR perked up a little this morning but is still only sitting at EUR 1.1725.

GBPUSD rate which fell throughout Tuesday has found some GBP buyers and is sitting at USD 1.3750 as I write. These are the lowest levels in 3 weeks or more. That USD strength is odd when US data was quite disappointing yesterday.

US retail sales slumped due to shortages, particularly in the automobile industry. The data showed a shift to service sector spending. That’s a long-term change to be fair. The data also suggested there will be a slowdown in US economic growth in Q3.

UK inflation 2.0%; rate hikes delayed

We will see the EU inflation data today. That is likely to mirror the UK’s positive but muted vibe. Annual inflation of 2.2% or thereabouts, should leave the Euro largely unmolested.

The US data is likely to move things around this afternoon. Housing market numbers will accompany crude oil inventories and the day will be topped off by the release of the minutes from the last Federal Reserve Open Market Committee meeting.

Solid rise in Canadian inflation expected

The afternoon will also deliver Canada’s inflation data. That has been running at over 3% per annum and some forecasters think it will pip up to 3.4% in this dataset. The GBPCAD rate starts the day half a cent down on Monday’s spike high of CAD 1.74-ish. Stronger than forecast CPI data will most likely bring that lower. So beware if you are a CAD buyer.

And you have your choice of ‘Days’ today. You can celebrate “Pinot Noir Day’ or ‘Never Give Up Day’. Or, like me, you can combine the two. I probably won’t be around for a few days after this.

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