The Opening Bell: Where currencies start on Friday, July 14, 2017

By Dan Bell

The NZDUSD opens at 0.7321 (mid-rate) this morning.

The Kiwi was the best performer of the G10 currencies overnight as the market further digests Fed Chair Yellen’s comments from early Thursday morning.

Federal Reserve Chair Janet Yellen’s prepared testimony for her semi-annual report to Congress made clear that central bankers are struggling to understand the recent downward trend in inflation. Still, it is important to remember that the path of monetary policy depends not just on inflation, but also on unemployment. The Fed anticipates that low unemployment will push inflation back to its 2% target.

Traditionalists at the Fed, including Yellen, believe that if policy makers do not tighten pre-emptively in this environment, unemployment will undershoot its natural rate, pushing inflation above target. Initially the market interpreted her comments as a dovish turn that puts in doubt the Fed’s expected policy path for the remainder of 2017 and in 2018. However, on reflection, the market has considered there will be at least one more hike in the Fed Interest rate in 2017 and 3 in 2018, and for the time being has sold the USD.

In the week ending July 8, the U.S. advance figure for seasonally adjusted initial claims was 247,000, a decrease of 3,000 from the previous week’s revised level.

The U.S. Producer Price Index for final demand increased 0.1% in June, seasonally adjusted. Final demand prices were unchanged in May and rose 0.5% in April.

The U.S. Monthly Treasury Statement showed a deficit of USD 90.2 Billion.

Data releases overnight for the U.S. tonight include CPI, Core CPI, Retail Sales, Capacity Utilizaton Rate, Industrial Production, Business Inventories, Preliminary University of Michigan Inflation Expectations and Consumer Sentiment, and Industrial Production.

Global equity markets are higher except the UK:  Dow +0.06%, S&P 500 +0.17%, FTSE -0.05%, DAX +0.12%, CAC +0.25%, Nikkei -+0.01%, Shanghai -+0.64%.

Gold prices have are down $2 or 0.2% overnight trading at $1,218 an ounce. .WTI Crude Oil prices are up 0.7% trading at $46.02 a barrel.

Current indicative rates:

NZDUSD       0.7321       0.9%
NZDEUR       0.6415       0.9%
NZDGBP       0.5652       0.3%
NZDJPY         82.86        0.9%
NZDAUD       0.9464       0.1%
NZDCAD       0.9316       0.7%
GBPNZD       1.7681      -0.2%

Upcoming Data releases (NZST):

  • 10:30 – NZD – Business NZ Manufacturing Index

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »

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