The Opening Bell: Where currencies start on Friday, September 15, 2017

By Dan Bell

The NZDUSD opens at 0.7211 (mid-rate) this morning.

The Kiwi is the worst performing currency of the G10 currencies overnight with the bigger mover being the Great British Pound which strengthened 1.8% against the NZD.

Signalling that inflation is overtaking Brexit-related slowdown as an economic risk, Bank of England policy makers said they’re headed toward raising interest rates for the first time in more than a decade. The pound surged and gilt yields jumped as investors anticipated rates may increase as soon as November, far earlier than the previous consensus.

The Bank of England said policy makers may see the need to reduce stimulus in the near future as it kept the benchmark interest rate at a record low. The Monetary Policy Committee (MPC) voted 7-2 to hold at 0.25%, as predicted by all 59 economists in a Bloomberg survey. Ian McCafferty and Michael Saunders maintained their push for a 25 basis-point increase, which would reverse the rate cut put in place after the Brexit vote in 2016.

The MPC voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion, and to maintain the stock of UK government bond purchases, at £435 billion.

U.S. Consumer-price index increased 0.4% in August after a 0.1% rise in July and better than the 0.3% anticipated. U.S. CPI rose 1.9% compared with August 2016 also ahead of expectation. Inflation may finally be getting back on track to reach the Federal Reserve’s goal, as the U.S. cost of living accelerated following a weak stretch.

In the week ending September 9, the U.S. advance figure for seasonally adjusted Initial Claims was 284k, a decrease of 14k from the previous week’s unrevised level of 298k. The 4-week moving average was 263,250, an increase of 13k from the previous week’s unrevised average of 250,250. This is the highest level for this average since August 13, 2016 when it was 263,250.

Global equity markets are mainly lower: Dow +0.17%, S&P500 -0.04%, FTSE -1.14%, DAX -0.10%, CAC +0.15%, Nikkei -0.29%, Shanghai -0.38%.

Gold prices are up $5 or 0.4% currently trading at $1,326 an ounce. WTI Crude Oil prices are closing in on 50.00 up 0.7% currently trading at $49.67 a barrel

Current indicative rates:

NZDUSD    0.7211    -0.3%
NZDEUR     0.6054    -0.5%
NZDGBP    0.5382    -1.8%
NZDJPY       79.72    -0.4%
NZDAUD    0.9031    -0.4%
NZDCAD    0.8792    -0.3%
GBPNZD    1.8573    1.8%


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

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