As the USD plunged post the CPI data, the NZD broke through the 0.7250 technical resistance level to a high of 0.7318, before seeing some selling pressure emerge. It has been falling as Yellen speaks and it currently sits around 0.7255. The AUD also outperformed, rising to around 0.7635 and currently sits at 0.7585.
GBP underperformed as wage data undershot expectations, suggesting a larger fall in real wages, that won’t be supporting consumer spending anytime soon. GBP got to as high as 1.2818 but is now flat for the day at 1.2750. EUR almost reached 1.13, but the rally has now been fully unwound.
JPY essentially followed the move in UST yields, falling as low as 108.83 with UST yields at their nadir and climbing back to 109.60 as yields reversed course.
In other news, oil prices fell to their lowest level in more than a month as US gasoline inventories rose and the IEA said that new production from OPEC’s rivals will be more than enough to meet growth in demand next year. WTI crude is down about 3½% to below USD 45. This has seen the CAD underperform, with USD/CAD up 0.1% to 1.3260 and NZD/CAD up 0.6% to 0.9620.
There is plenty of other economic news and events in the day ahead. In the local session, we expect Q1 NZ GDP to show underwhelming growth, although strength in nominal GDP, fuelled by strong terms of trade, is a better indicator of recent economic performance.
The Bank of England is expected to keep policy unchanged tonight. It is likely prepared to look through recent GBP-fuelled strength in inflation as the UK economic outlook looks fairly depressed amidst falling real wages for consumers and uncertainty for businesses.
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