NZD/USD Spikes on RBNZ Shock, GBP/USD Muted on Inflation Drop - US Market Open
NZD: The Kiwi soared following the surprise by the RBNZ, who left the OCR unchanged at 1%, defying expectations for a 25bps cut to 0.75%, of which 80% had been priced in by money markets. Consequently, NZD/USD spiked by over 1%, marking its strongest intra-day performance since the back-end of January. Interestingly, the RBNZ maintained that the low in the OCR is at 0.9% across the forecast horizon, which in turn has seen money markets place a 50% probability that the central bank will ease again in 2020. That said, as we have highlighted in recent weeks, bearish positioning remains extreme and thus risk-reward had favoured NZD upside.
RBNZ Economic Forecasts
OCR (Year Average)
GBP: A muted reaction in the Pound following the lower than expected inflation figures in which the headline rate dropped to its lowest level since Nov’16. However, much of this had been expected by the BoE, who noted in last week’s MPR that the fall in household energy bills were set to weigh on inflation in Q4 with the central bank anticipating inflation to average 1.4% in the final quarter and average 1.2% by Q2 2020. Alongside this, core inflation held up relatively well at 1.7%, as such, little change was seen in regard to expectations of near-term BoE easing.
Source: DailyFX, Refinitiv
Economic Calendar (13/11/19)
WHAT’S DRIVING MARKETS TODAY
- “US Dollar Technical Forecast: EUR/USD, USD/CAD Face Critical Test” by Justin McQueen, Market Analyst
- “FTSE 100 Forecast: Risk of Decline Heightens as Technicals Weaken” by Paul Robinson, Currency Strategist
- “Canadian Dollar Forecast: USD/CAD Price Running into Renewed Resistance” by Nick Cawley, Market Analyst
--- Written by Justin McQueen, Market Analyst
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