Overnight, second quarter GDP data from New Zealand came in lower than expected at 0.4%, reinforcing the dovish message earlier this month form the RBNZ. They have already signalled that there may be a need for further easing and markets are beginning to price in more aggressive rate cuts. The NZ$ fell 0.5% on the news as investors anticipate rate cuts sooner rather than later. With prices approaching six year highs NZ$ buyers may want to consider reducing part of their exposure at current levels.
Sterling was given a boost yesterday on better than expected jobs data. The unemployment rate slid to 5.5% in July, which was below expectations. Wages also continued to climb with pay, including bonuses up 2.9%. Regular pay is now growing at its fastest rate for more than six years. The pound was also bolstered as it emerged that a couple of members of the MPC believe that the return of higher wages and the prospect of higher oil prices would force the Bank of England to raise rates in the near future. Their comments suggest a slight shift from the MOC to a more hawkish stance. Low inflation and rising wages should lead to increased consumer spending so this morning’s Retail sales figures will be closely watched. Another positive number will support the Pound.
This evening brings the long awaited FOMC meeting. The statement is released at 19.00 with the press conference 30 minutes later. Economists are divided as to whether or not the Fed will pull the trigger in September after a run of weaker US data and the slowdown in the Chinese economy. I don't believe that we will see a rise later today but I think they will leave the door open for a move at some point later this year. In this scenario there may be opportunities for dollar buyers so it is worth speaking with your Halo Financial Consultant to discuss placing limit orders.