NZDUSD 0.6614 -0.6% NZDEUR 0.5677 0.3% NZDGBP 0.5055 0.0% NZDJPY 74.99 0.0% NZDAUD 0.9174 0.1% NZDCAD 0.8625 -0.4% GBPNZD 1.9779 -0.1%
In what was a relatively eventful data day yesterday, we did not see too much movement. The RBNZ kept rates on hold at 1.75% as widely expected, while the Fed raised their base rate to <2.25%, which was also no surprise to the markets. The interesting thing to note was in their policy statement they removed their comment “The stance of monetary policy remains accommodative”. Interestingly the USD weakened on that statement. While on the face of it removing this line sounds hawkish, to understand the market’s reaction we need a bit more background. The Fed are trying to normalise rates back to their long run “normal” level, or “neutral rate”. By definition, if the Federal funds rate is below this natural rate it is considered accommodative, and above it would be considered a tightening of policy. By removing that phrase, the market took that to mean that maybe the Fed were getting closer to their neutral rate than thought, and therefore policy is no longer accommodative. All this implies that future rates may not be hiked as high as potentially thought. To get back to the present though, we did have strong numbers out of the States. Durable goods came in at a very strong 4.5% m/m, beating expectations, and GDP came in at 4.4% q/q. While this was on expectations, it is still a very strong number for such a large developed economy. Europe and the UK were pretty quiet on the Brexit front, with no major headlines coming out. As time goes on and we get closer to the deadline in March next year, no news is not going to be considered good news, and the market will see the lack of positive news as an increase in the odds of a no deal Brexit. Excluding Asia, global equity markets were slightly higher on the day - Dow +0.21%, S&P 500 +0.28%, FTSE +0.45%, DAX +0.4%, CAC +0.5%, Nikkei -0.99%, Shanghai -0.54%. Gold prices are down a further 0.7% to USD$1,187 an ounce, while WTI Crude Oil prices traded back up 0.8% to US$72.21 per barrel.
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