RBNZ on hold and soften tone
The Reserve Bank of New Zealand maintained their base rate at 5.5% when they met this morning but there was a softening of the tone in the statement they released. They spoke more about the risk too economic growth but continued to maintain that interest rates may have to remain elevated for longer. Most in the markets, consider we won’t see an interest rate cut until the second quarter of next year. The Kiwi dollar weakened a little after the decision but not by much. The GBP/NZD rate dipped below NZD 2.04 ahead of the announcement but is up to NZD 2.0180 at the time of writing. The next data that may influence this pair comes from the UK in the guise of Purchasing Managers Indices. The forecasts are not good so we could see this exchange rate slipped a little.
Euro traders watching for PMIs and ECB
The euro has been a little lacklustre of late. The GBP/EUR rate has been in a slightly downward path for the last 6 weeks. At the start of this period, it topped out at €1.1775 and we are currently near the low end of the range at €1.1520. This slightly meandering pattern has a lot to do with the similarities between the UK and EU economic cycles. We will hear from two members of the European Central Bank today and we will be hoping for some guidance as to where the ECB seize the eurozone economy over the next year and where they see eurozone interest rates over that same time frame. We will also see purchasing managers indices, especially for the service sector, from the UK and EU today. There would have to be a significant difference in the outcomes of these between the UK and EU for the data to shift this exchange rate to any great degree.
US job market suggests further rate hikes may be coming
Friday will see the release of the September US Employment Report and that is the definitive guide as to how well the US job market is performing. However, we saw the JOLTS (Job Openings and Labour Turnover Survey) yesterday and that reflected 9.6 million US job openings. That is a rise of 690,000 opportunities between July and August. This was way above the market expectation and it has already been seen as evidence that the Federal Reserve will continue to maintain a tight monetary policy stance with a very strong chance of further interest rate hikes. As you can imagine, that made the US dollar more attractive to investors. So it gained half a cent against the pound and ¼ of a cent against the euro but it has given up most of those gains in early trade today. GBP/USD is back up to $1.2060, barely 1/5th of a cent down on yesterday’s high and the EUR/USD rate is practically in line with yesterday’s high at $1.0470. As well as a slew of purchasing managers indices and speeches by a number of European Central Bank members, we will also see the survey on white-collar jobs from ADP. It is likely that this will reinforce the aforementioned views of tighter monetary policy for longer in the US.