PMIs Disappoint, NZD Rallies on RBNZ, Fed Minutes in Focus Today

PMIs Deepen Slowdown Worries, GBP Falls After Services Index Slumps

The US dollar traded lower against all but two of the other major currencies on Tuesday and during the Asian session Wednesday. It gained only versus GBP and CAD, while it lost the most ground versus NZD, JPY, and AUD.

EUR/GBP — Technical Outlook

EUR/GBP spiked up yesterday, following the disappointment in the UK services PMI, crossing above the 0.8530 barrier, marked by the highs of May 13th and 16th, and hitting resistance at 0.8585. Overall, the pair remains above the tentative upside support line drawn from the low of April 14th, which combined with yesterday’s rally makes us believe that another round of buying could be possible, despite the setback after hitting 0.8585.

RBNZ Steepens its Rate Path, Attention Turns to Fed Minutes

The main gainer was the New Zealand dollar, but not due to an improving market sentiment. The Kiwi surged overnight after the RBNZ raised interest rates by 50bps to 2.0% as was broadly anticipated, but also revised up its rate-path projections. The Bank now sees its OCR hitting 3.95% by September 2023. Following the more cautious language at the last gathering, where officials judged that the rate path indicated in February was still appropriate, this is clearly a more hawkish stance in our view, which combined with the latest concerns over the performance of the US economy, could help NZD/USD drift a bit higher.

NZD/USD — Technical Outlook

NZD/USD spiked higher after the RBNZ revised up its rate-path projections, after it hit support at the crossroads of the 0.6420 barrier, and the upside support line drawn from the low of May 16th. The spike took the rate above the 0.6490 zone, confirming a forthcoming higher high on the 4-hour chart, which combined with the fact that the pair is trading above the prior downside resistance line taken from the high of April 5th, paints a positive near-term picture.

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