0.91 -0.26%
    1.34 -0.6%
    144.37 0.26%
    0.88 -0.16%
    1.09 0.55%
    1.24 0.71%
    0.68 1.51%
    132.42 -0.28%
    0.63 0.67%

NZD/USD craters 1% after RBNZ decision; US data

What a day in the currency markets as volatility has arrived!

On Wednesday, the Kiwi dropped to two-month lows, falling to the significant support of 0.6870 as sentiment notably worsened in the commodity-linked currencies.

RBNZ decision taken negatively

Earlier today, the Reserve Bank of New Zealand hiked the Official Cash Rate to 0.75% from 0.5% , which had been widely expected. However, the following statement sounded dovish, and it looks like further rate hikes are not on the agenda soon.

The new RBNZ guidance now has the key policy rate at 2.10% by December 2022, a year sooner than the last estimate . However, this is notably below what is currently priced into the financial markets.

The RBNZ is implying policy rate hikes of between 125-150bps by the end of next year and given New Zealand’s zero-COVID policy and the government today announcing the re-opening of borders from January, there are high risks of further disruptions ahead, economists at MUFG Bank said Wednesday.

Full US calendar

Afterward, traders paid attention to the US Durable Goods Orders, which tumbled 0.5% month-on-month (versus +0.2% expected) in October and September’s 0.3% monthly print was revised down to -0.4%.

On the other hand, the value of core capital goods orders, a proxy for business investment in equipment that excludes aircraft and military hardware, rose 0.6% after an upwardly revised 1.3% increase a month earlier.

Core capital goods shipments, a figure used to help calculate equipment investment in the government’s GDP report, increased 0.3% after jumping an upwardly 1.3% in the prior month.

From other news, today’s first revision of the USQ3 GDP data was 2.1%, below the 2.2% expected, if slightly better than the 2.0% initial estimate. In addition, personal consumption rose 1.7% annualized in 3Q after rising 12.0% the prior quarter.

Data also showed that the University Of Michigan’s Sentiment rose from 66.8 preliminary to 67.4 final but remains well below the 71.7 in October. However, consumers’ inflation expectations remained at their highest since 2008.

Lastly, the Fed’s favorite inflation indicator – Core PCE Deflator – jumped to its highest since 1991 to 4.1%, while the headline PCE rose 5.0% yearly . That is more than twice the Fed’s 2% inflation goal.

The day will be finished with the FOMC minutes from the latest Fed’s monetary policy meeting, where the central bank decided to start tapering its bond purchases.

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