The Opening Bell: Where currencies start on Thursday, July 13, 2017

By Dan Bell

The NZDUSD opens at 0.7258 (mid-rate) this morning.

Fed Chair Janet Yellen’s testimony before a House committee this morning has led to a rally in US equity and treasury prices with the Dow hitting a new intraday high trading up through 21,500. The USD is putting in a mixed performance following Yellen’s testimony, rising against the EUR while losing ground against the JPY, GBP and commodity-linked currencies including the NZD and AUD.

Yellen’s testimony has been viewed by many investors as quite “dovish” after Yellen commented that any subsequent interest rate increases would be gradual, and that they wouldn’t need to rise much to reach a “neutral policy stance.” Yellen also confirmed that US policymakers were watching inflation very closely given its failure to pick up to the central bank’s target.

The rising star overnight has been the CAD after the Bank of Canada delivered the expected interest rate hike at this morning’s monetary policy meeting. The 25bps increase is the first tightening in seven years and the first step towards unwinding nearly a decade of easing.

Eurozone industrial production growth exceeded expectations in May with the Eurostat report showing Industrial output grew 1.3% m/m following a revised 0.3% rise in April.

The UK’s unemployment rate fell to the lowest level in 42 years hitting 4.5% in the three months to May, the rate had been expected to remain at 4.6%. The GBP failed to rally on the back of the data release as investors focused on BOE Deputy Governor Broadbent’s comments. Mr Broadbent told the press that in his opinion “it is a bit tricky at the moment to make a decision (to raise rates). I am not ready to do it yet”.

Global equity markets remain mixed – Dow +0.64, S&P 500 +0.74, FTSE +1.19%, DAX +1.52%, CAC +1.59%, Nikkei -0.48%, Shanghai -0.17%

Gold prices have gained 0.3% overnight trading at $1,220 an ounce. WTI Crude Oil prices have continues to rise, up 1.5% trading at $45.69 a barrel.

Current indicative rates:

NZDUSD       0.7258       0.5%
NZDEUR       0.6356       0.9%
NZDGBP       0.5634       0.2%
NZDJPY         82.12       -0.2%
NZDAUD       0.9456      -0.1%
NZDCAD       0.9251      -1.0%
GBPNZD       1.7749      -0.2%

Upcoming Data releases (NZST):

  • 10:45 FPI m/m

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

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