Spreadex Market Update
Hawkish RBNZ Sends NZD Higher, FOMC Minutes Up Nex
NZD Rallies 1.5% as RBNZ hikes rates and lifts rates forecasts. Choppy start for equities following yesterday’s PMI misses. Gold and silver lower on fresh USD demand. Tonight’s FOMC minutes will be the main data event for the session. Traders also watch ECB’s Lagarde and BOJ’s Kuroda who both speak.
Key Factors for Today
- NZD Much higher on RBA hike & hawkish forecasts
- European equities tank on PMI misses yesterday
- USD firmer ahead of FOMC minutes tonight
- Muted action in commodities
- ECB’s Lagarde to speak, BOJ’s Kuroda to speak
Coming Up
- EUR ECB’S Lagarde Speaks
- USD Durable Goods
- USD FOMC Minutes
US Dollar Sees Fresh Demand Ahead of FOMC Minutes
The US Dollar is seeing better demand across the European open on Wednesday following yet further losses yesterday. Today’s buying suggests that the positioning clear-out might have run its course for now, though it’s still early for such a call. Today’s FOMC minutes will be the main focus with investors looking to gauge just how hawkish the Fed’s discussions around coming meetings were. While talk of 50bs hikes is expected any mention of larger action will likely spark fresh volatility in USD today. However, in light of the more aggressively hawkish comments we’ve heard from Fed’s Powell recently, the minutes might lose some of their impact.
FTSE In Demand While DAX Heads Down
Equities are something of a mixed bag today, though generally speaking we are seeing better demand. The FTSE is leading the pack, currently around 1.3% off yesterday’s lows. European asset markets were heavily lower yesterday in response to disappointing PMI results in the eurozone. US markets seemed to take their own disappointing data a little better, no doubt helped by USD weakness yesterday. Hawkish FOMC minutes today will likely change this story, however.
NZD Storms Ahead Following RBNZ Hike
In FX, NZD has been the big winner across late Asian and early European trading. The RBNZ hiked rates by .5%, as expected, overnight though the accompanying rate projections were much more hawkish than expected. The RBNZ now forecasts year-end rates of 3.25% - 3.50%, up from 2.25%-2.50% in February. EUR has been the weakest currency so far today, reversing initial strength on the week as yesterday’s PMI misses create further uncertainty over potential ECB tightening this summer.
Gold & Silver Turn Lower on Better USD Demand
Precious metals are seeing a softer start to European trading on Wednesday. Better demand in USD today has seen both gold and silver retracing some yesterday’s gains. If USD is seen rallying again on tonight’s FOMC minutes this will no doubt add further downside pressure for metals with recent action looking very corrective against prior declines, suggesting further downside to come.
Oil Prices Muted Ahead of EIA Release
Oil prices continue to stagnate today. While we are so far in the green, price is sitting roughly where it started the week and is around the middle of the last fortnight’s range. Oil prices remain caught between opposing drivers, recessionary fears and demand concerns and near-term supply tightness. Today we have the latest weekly update from the EIA which is forecast to report a 2.2 million barrel drawdown.
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