NZD recovers despite mixed data
The GBPNZD rate is a cent down on yesterday’s highs after NZ unemployment data and Sino-US tensions eased a little. New Zealand’s unemployment level rose marginally from 3.1% to 3.3% in Q2 and the labour cost index was also higher at 1.3%. That ought to have weakened the Kiwi dollar a little, but it didn’t. Instead, having been dumped in favour of the safe haven US dollar on Tuesday, the NZD recovered a little as traders and investors seemed to feel a little less tension re the visit to Taiwan by Nancy Pelosi. Although China is running a military drill near to Taiwan, all seem to concede that this is little more than sabre rattling. So the USD has slipped a little and that allowed the NZD to strengthen. GBPNZD starts the day around NZD1.9430 this morning; marginally above yesterday’s opening price.
USD bounces as Fed speakers talk of further hikes
We saw the USD make some gains overnight after two Federal Reserve speakers suggested further interest rate hikes are on their way. Cleveland Fed President Loretta Mester said inflation was yet to peak, so further interest rate hikes are expected and Charles Evans, her Chicago counterpart suggested the base rate will be up to at least 3.75% by the year end. Also, San Francisco Fed President Mary Daly warned against assuming the Fed was slowing the pace of its rate hikes. So the USD made some gains. That was countered a little by easing of nervousness around the Pelosi visit to Taiwan but the USD gained, nonetheless. GBPUSD is down to $1.2165 this morning and the EURUSD rate is down to $1.0165 after a small early hours bounce. The day ahead brings a raft of US Purchasing Managers Indices and the Factory Orders Data for June. The forecasts for all of this data are little mixed (not the girl band, I hasten to add) so the dollar’s path cannot be cleanly forecast.
Sterling treads water ahead of tomorrow’s BOE decision
We have very little UK data today other than a composite purchasing managers index, which is forecast to be in line with the previous month. Traders will be focusing on tomorrow’s Bank of England interest rate decision and the statement that follows. The general perception is that the bank will raise the UK base rate by half of 1% two 1.75% and, as long as that’s what they do, sterling shouldn’t be particularly affected by the news. However, the tone of the bank’s statement and Andrew Bailey’s speech will be the key elements in sterling’s path. As with all central banks, the BOE is walking a tightrope between containing inflation without stifling the fragile growth within the system. For now, sterling is steady around €1.1960 and $1.2165. It’s likely to remain there today, barring any external influence.