The US Dollar rallied significantly yesterday evening after the Federal Reserve inexplicably increased the likelihood of a December interest rate hike. The Euro-US Dollar rate pushed lower again but the $1.09 level is proving resilient and could start to form a support level. Against the Pound, on a day in which there was virtually no UK data, it was understandable that the Pound would slip by a cent or so against the US Dollar but there is more data from both sides of the Atlantic today to stir the blood of traders.
From the UK we get consumer credit and mortgage data as well as the CBI retail sector survey. Whilst the mortgage data is expected to be rather upbeat, the CBI survey is an erratic beast and often seems to be at odds with the official retail sales data. Sterling is likely to stand its ground - unless the mortgage data is stupendous of course.
The US data comes in the form of the preliminary economic growth report. As with the UK data, this is based on only a minority of the full dataset but is at least a guide to the state of the US economy. The forecasts suggest the figure will fall from the previous 3.9% to something like 1.6%. That hardly makes the case for a US interest rate hike but we shall see. If the number is poor, then the US Dollar will give back all of yesterday's gains.
The Reserve Bank of New Zealand left the NZ base rate on hold at their meeting overnight but signalled they were poised to cut again if the NZ Dollar remained strong. After three previous rate cuts, the pause was kind of expected but many are predicting another rate cut in December because the NZ Dollar doesn't look ready to weaken yet. With a 2.75% yield on NZD funds, the currency is an obvious target for international investors who can borrow at virtually 0% elsewhere. With the opposing forces of a slowing China, a very attractive NZ interest rate and generally improving UK data, it is little wonder the Sterling – NZ Dollar rate is trapped between 2.25 and 2.30. Uncertainty in graphic form you might say. If NZ business confidence fails again as it did last month, I suspect the NZ Dollar will decline overnight tonight. That figure will be released at midnight UK time.
And I'll end with a sweet story. Be ready to say Ahhhh. At a Vet's surgery in Whangarei, New Zealand, the nurses came in one morning to find a box on the doorstep with 4 very young kittens inside. They took them in and started to care for them and the next morning, they found a tabby cat trying to find a way into the surgery. They realised she was a nursing mother and twigged the situation. So they let her in and she lay down straight away to feed her babies. No one knows whether she was abandoned with the kittens or sought them out but it is a sweet story anyway and they have a new home and everyone lived happily ever after. So off you go now with that warm fuzzy feeling and have a great Thursday.
Q) What's the difference between a lunatic and an idiot?
A) A lunatic is someone driving faster than you and an idiot is someone driving slower.
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