Data in the US was limited and as a result investors just chose to focus on a couple of negative headlines. The World Bank lowered its global growth forecast for 2014 and the shock Eric Cantor loss was among some of the headlines investors focused on.
NZD in focus on the back of a rate rise
Making headlines in Asia this morning is the RBNZ’s decision to raise rates by a further 25 basis points to 3.25%. The central bank still sees considerable momentum in the economy and said future rate moves will depend on how data progresses. It seems some of the market was beginning to feel we might see a pause in rates after today, but comments seem to have changed market perception. The market is pricing in an additional 60 basis points worth of hikes this year and the three-month bills are forecasting rates to be 4%.
After having had a lacklustre week, the NZD finally came back to life on the back of the decision and NZD/USD rallied to 0.8629. During the process it managed to break downtrend resistance and is now testing the 23.6% retracement of the February low to May high move. The momentum seems to be firmly to the upside at the moment, but a concern will be the fact that the RBNZ is talking down the currency. In light of the commodity price weakness, the RBNZ feels the exchange rate is not quite reflecting that.