RBNZ 1st rate hike in 7 years but NZD weaker

The Reserve Bank of New Zealand raised its base rate to 0.5% early this morning. Whilst the general market perception was that the RBNZ would make that move, there were also several commentators who thought they may delay due to the number of new covid cases in the country. Perhaps markets concerns are that the central bank has moved too soon would explain the fact that the New Zealand dollar actually weakened on the announcement. GBPNZD is up approximately 1 cent this morning to NZD 1.9660.

GBP bounces on government borrowing adjustment

Part of that move is likely to be attributed to the adjustments made by the Office for National Statistics in the UK government borrowing data. The ONS overstated government borrowing by £4.6 billion for last year and £2.5 billion in the current financial year. That still leaves the UK government borrowing at eye-watering levels but not quite as bad as previously thought.

Interestingly, Sterling also gained a little against the Aussie and Canadian Dollars in spite of a rise in oil and energy prices; a significant export area for both economies. GBPAUD is up to AUD 1.8750 and GBPCAD is pushing CAD 1.7150, having been half a cent lower yesterday.

Euro struggling as German factory orders disappoint

The euro is on the back foot this morning after German factory orders dropped 7.7% in the month of August. That’s the worst result since June 2020. Supply chain bottlenecks have been cited as a key problem but the slow recovery in demand is also weighing on manufacturers around the world. Eurozone retail sales will be released today, so that’s the currency’s next hurdle.

Oil is also a feature of US data today, with the release of their crude oil stockpiles volume. A drop in inventories is expected and that would add to the upward price pressure for the black stuff. The other big story in the US is the lack of agreement on what the US debt ceiling should be. It is always a political bargaining chip when renewal time comes and this has been no exception. The GBPUSD rate is still hunkered down at $1.36 with little variation. The EURUSD rate is pushing down to levels we haven’t seen since July 2020. At $1.1575, the EURUSD rate runs a very real risk of a sizable collapse. Lest we forget, this pair got below $1.07 in March 2020.

It is set to be a busy day again and today is Random Acts of Poetry Day. A poetry day, you say, No way. I’d love to play and rhyme away but that would leave the rest of my day in disarray. Oy Vey, as they say.

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