The Opening Bell: Where currencies start on Thursday, June 15, 2017

By Dan Bell

The NZDUSD opens at 0.7247 (mid-rate) this morning.

The Kiwi is up against all of its trading partners except the AUD. The Kiwi briefly tested over 0.7300 this morning and has traded a 120 point range in the last 24 hours.

The NZ Current account deficit seasonally adjusted was $2.8 billion during the quarter was up $1.1 billion from December last year. “It was the biggest quarterly deficit since the global financial crisis hit world markets in 2008,” Stats NZ said.

The Fed hiked Interest Rates 0.25% this morning at 6am NZT. The pertinent points of the FOMC statement at 6:30am NZT were:

  • U.S. Fed have hiked interest rates 0.25% to 1.25% (RBNZ is at 1.75% and RBA is at 1.5%)
  • Rate hike reflects Economic progress
  • Fed Fund rate remains somewhat below neutral level
  • Economy should continue to warrant hikes, and appears to have rebounded
  • The Fed expects inflation to move up to 2%
  • Signs of an improving Labor market
  • Job market should strengthen somewhat further
  • Apparent one off events weigh on inflation
  • Policy is not on a pre-set course
  • Balance sheet not intended to be active policy tool
  • Trimming of balance sheet should begin this year by USD 50bn per month
  • Balance sheet trim will take “a few years”
  • Expect moderate growth in the next few years
  • Yellen: “I intend to serve out term as Fed chair” – no conversations with Trump about Future
  • Yellen declines comment on future role as Fed Chair, but “intends to find appropriate nominees”
  • Conditions in place for inflation to rise

The U.S. Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1% in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported overnight. Over the last 12 months, the all items index rose 1.9%. A decrease in the energy index was the main contributor to the monthly decrease in the all items index.

U.S. retail sales recorded their biggest drop in more than a year in May amid declining purchases of motor vehicles and discretionary spending, which could temper expectations for a sharp acceleration in economic growth in the second quarter. The Commerce Department said overnight retail sales fell 0.3% last month after an unrevised 0.4% increase in April. May’s decline was the largest since January 2016 and confounded economists’ expectation for a 0.1% gain.

The number of persons employed increased by 0.4% seasonally adjusted in both the Euro Area (EA19) and in the EU28 in the first quarter of 2017 compared with the previous quarter. In the fourth quarter of 2016, employment increased also by 0.4% in both areas. Compared with the same quarter of the previous year, employment increased by 1.5% in the euro area and by 1.4% in the EU28 in the first quarter of 2017.

The UK unemployment rate was 4.6%, down from 5.0% a year earlier and the joint lowest since 1975. The UK employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.8%, the joint highest since comparable records began in 1971.

Today we have NZD GDP at 10:45am, AUD Inflation Expectations at 1pm, and AUD Employment change, AUD Unemployment Rate and RBA bulletin at 1:30pm.

Global equity markets are mainly lower – Dow +0.07%, S&P 500 -0.13%, FTSE -0.35%, DAX +0.32%, CAC -0.35%, Nikkei -0.08%, Shanghai -0.73%.

Gold prices were up $5 or 0.4% at $1,271 an ounce before the FOMC but are now down $5 or 0.4% from yesterday’s open to $1261. WTI Crude Oil prices have plunged 3.6% lower at $44.75 a barrel.

Current indicative rates:

NZDUSD       0.7247       0.3%
NZDEUR       0.6464       0.3%
NZDGBP       0.5687       0.4%
NZDJPY         79.48        0.0%
NZDAUD       0.9564      -0.2%
NZDCAD       0.9615       0.6%
GBPNZD       1.7578      -0.4%

Upcoming Data releases (NZST):

  • 10:45am – NZD – GDP
  • 1:00pm – AUD – Inflation Expectations
  • 1:30pm – AUD – Employment Change
  • 1:30pm – AUD – Unemployment Rate

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

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