New Zealand Dollar took a hit as business confidence dropped to a 11-year low which has come despite the RBNZ’s surprise 50bps cut in August. Consequently, the Kiwi made a fresh 4-year low having briefly dipped below 0.6250. While CFTC positioning highlights that net NZD shorts may be at extreme levels, the lack of positives emanating from the New Zealand economy keeps the currency pressured.
Australian Dollar eyes the RBA rate decision in which expectations are for a 25bps rate cut as money markets price in 19bps (=78% likelihood) worth of easing. However, last week saw RBA Governor Lowe refrain from providing a confirmatory signal, while the RBA’s Shadow Board has attached a 65% probability that the OCR should remain at 1% with a 24% probability that a cut is required. As such, given current market pricing risks are asymetrically tilted to the upside provided that the RBA keeps the cash rate unchanged. That said, in light of the deterioation risk environment, rallies in the currency may well be sold.
US Dollar posts fresh 2019 highs as Euro and Sterling breaks below 1.09 and 1.23 respectively. Concerns are likely to persist among the ECB rate setters as German inflation dipped below expectations with the headline rate at 1.2% (exp. 1.3%), which also came in tandem with yet another slide in inflation expectations. Elsewhere, UK politics is expected to boost volatility in the Pound.
WHAT’S DRIVING MARKETS TODAY
- “Sterling (GBP) Price Remains Volatile as Brexit Rumors Swirl” by Nick Cawley, Market Analyst
- “EUR/USD, EUR/JPY Outlook: Price May Change its Current Direction” by Mahmoud Alkudsi, Market Analyst
- “US Dollar Preferred Safe-Haven, CAD Longs Slashed, NZD Shorts Extreme – COT Report” by Justin McQueen, Market Analyst
- “Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor
— Written by Justin McQueen, Market Analyst
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