The Opening Bell: Where currencies start on Thursday, August 17, 2017

By Dan Bell

The NZDUSD opens at 0.7317 (mid-rate) this morning.

This morning’s FOMC meeting minutes have shown there is a growing split between policy makers on the timing of future interest rate hikes, with some officials arguing that the FOMC “could afford to be patient under current circumstances in deciding when to increase the federal funds rate further”. Inflation in the US has continued to lag the Fed’s 2% target with some voting members now believing future hikes should be on hold until “incoming information confirmed that the recent low readings on inflation were not likely to persist”. The one thing members seem to agree on is the plan for the Fed to reduce its USD4.5t balance sheet “relatively soon”. Many economists now expect the Fed to announce a road map to reducing the balance sheet at their September meeting.

Prior to the FOMC meeting minutes the USD had come under pressure after the US Department of Commerce reported housing starts for the month of July fell by 4.8% to annual rate of 1.155m. The report also showed building permits for the same month decreased by 4.1% from June’s print.

There was better economic data out of the UK overnight which will have pleased BOE Gov Carney, with the unemployment rate edging down to 4.4% in Q2 down from 4.5% in Q1. Economists had forecast an unchanged result. Average earnings in the UK also exceeded economists’ estimates increasing by 2.1% vs. expectations of a 1.8% rise.

This morning’s PPI data release is due out at 10:45 while direction for the NZDAUD cross rate should be driven by this afternoon’s Australian employment report.

European and US equity markets are positive – Dow +0.12%, S&P 500 +0.21%, FTSE +0.67%, DAX +0.71%, CAC +0.71%, Nikkei -0.12%, Shanghai -0.15%.

Gold prices have strengthened, up 0.8% trading at $1,282 an ounce .WTI Crude Oil prices have extended their fall, down 1.5% trading at $46.86 a barrel.

Current indicative rates:

NZDUSD       0.7317       1.1%
NZDEUR       0.6215       0.8%
NZDGBP       0.5674       0.9%
NZDJPY         80.58        0.7%
NZDAUD       0.9228      -0.3%
NZDCAD       0.9245       0.2%
GBPNZD       1.7624      -0.9%

Upcoming Data releases (NZST):

  • 10:45 – PPI Input q/q
  • 10:45 – PPI Output q/q
  • 13:30 – Australian Employment Report

 

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

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