He US dollar advances against most currencies and hits a new near two-month high against a basket of peer currencies, while the New Zealand dollar plummets this Wednesday after the country’s central bank cut interest rates by 50 points basics.
The kiwi falls 0.9% against the US dollar to $0.6079 and reaches its lowest level in almost two months after the decision of the Reserve Bank of New Zealand which was accompanied by a clear dovish message suggesting more rate cuts were coming in the coming months. Crosses also fell with the Australian dollar rising 0.75% against its antipodean pair at NZ$1.1076.
“We see increasing headwinds in the near term (for the New Zealand dollar against the US dollar), including an aggressive repricing by the Federal Reserve“Potentially strong fiscal stimulus China is a bullish risk, but (the Australian dollar) is likely to benefit more,” he added.
He Chinese Ministry of Finance on Wednesday called a press conference for Saturday about tax policyraising stimulus expectations, a day after a press conference by the state planner – the National Development and Reform Commission– will disappoint markets by not offering important new details on the stimulus. But that didn’t do much for the Australian dollar, which fell 0.2% against the US dollar to $0.6732.
Eyes on the Fed
Investors will also be watching the release of the minutes of the September meeting of the Federal Reservewhich will be published later in the day and will show the debates about what at the time seemed like a deterioration in the labor market. The meeting ended with all those responsible for monetary policyexcept one, agreeing to a cut of 50 basis points.
That will be somewhat outdated, however, after last Friday’s strong nonfarm payrolls data caused markets to reprice expectations for rate cut of the Fed in the short term. Investors are now pricing in a roughly 85% chance of a quarter-basis-point cut, reflecting a small chance the Fed will leave rates unchanged, the CME FedWatch tool showed.
This represents a change from before the payrolls data, when a 25 basis point move was fully priced in and there was a one in three chance of a larger 50 basis point move.
The report of consumer price index September USA Thursday will be the main data this week, as investors will be watching to see if there are any signs that the stronger labor market is having an effect on the inflation.
At a time when markets are less certain about cuts in the Fed, Although easing elsewhere is still priced in, the dollar index touched 102.7, its highest level since August 16. It was last trading just below that figure, up 0.19% on the day.
The euro fell 0.18% to $1.0960, while the pound fell a similar amount to $1.3086, having hit a nearly one-month low.
Source: Ambito
