FX recap: NZD stars in lacklustre trade ahead of US CPI
Fawad Razaqzada February 13, 2019 6:53 AM
After being hit by profit-taking yesterday, the US dollar was trading mixed on Wednesday morning when this report was written. The greenback was holding its own well against the euro and the pound but was down against some commodity dollars. FX market participants were looking forward to US consumer inflation data, due for release at 13:30 GMT (08:30 ET), for direction.
RBNZ refuses to signal rate cute
As mentioned, the dollar was trading mixed with commodity dollars once again outperforming, in part due to the ongoing risk-on sentiment. The New Zealand dollar has been the biggest riser in G10 currencies overnight. It jumped around 100 pips on short-covering as the Reserve Bank of New Zealand (RBNZ) refused to signal a cut in interest rates with RBNZ Governor Adrian Orr saying that the chances of a cut have not increased. The RBNZ had been widely expected by analysts – ourselves included – to be a bit more dovish like other central banks recently. So, the market has been wrong-footed.
Eurozone data disappoints and UK CPI misses
Industrial production in the euro area fell 0.9% in December compared a smaller 0.4% decline expected and comes on the back of a 1.7% drop the month before. The DAX eased off its best levels in reaction to the latest soft eurozone data, while the euro showed only a modest negative reaction. Could we see a more pronounced reaction later on today?
Meanwhile, the GBP/USD initially edged lower in reaction to the latest UK Consumer Price Index (CPI) measure of inflation pointing to lower prices. But with Brexit being the focal point, pound traders shrugged off the domestic data once again. Still, the weaker inflation data has raised the prospects of UK interest rates remaining low for even longer, pushing the FTSE near its 2019 high of 7187 before coming off its best levels as the pound rebounded to turn positive on the day.
According to the ONS, the headline UK CPI stood at 1.8% year-over-year in January, falling below the Bank of England’s 2% target for the first time in two years. The slowdown in headline inflation was more than 1.9% expected and compares to 2.1% in December. Other measures of inflation were mixed, with core CPI remaining unchanged at 1.9% as expected while the Retail Price Index (RPI) eased to 2.5%, compared to 2.6% expected and 2.7% in December.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.