Powell Stays Dovish, RBNZ Sees Higher Rates in December

Inflation Fears Persist Despite Powell’s Dovish Stance

The US dollar traded higher against the majority of the other G10 currencies on Tuesday and during the Asian session Wednesday. It gained the most versus CHF, JPY, SEK, and EUR, while it underperformed only versus NZD and GBP. The greenback was found virtually unchanged against CAD.

S&P 500 — Technical Outlook

After hitting the all-time high, at 3964, the S&P 500 index is now seen to be in a correction mode, as it makes its way towards the medium-term upside support line drawn from the low of March 23rd. If that upside line can stay intact, the bulls might join the game again. For now, we will take a somewhat bullish approach.

RBNZ Stands Pat, Sees Rates Turning Higher in December

Overnight, apart from the rising-yields theme, we also had an RBNZ monetary policy decision. The Bank decided to keep its official cash rate and its Large-Scale Asset Purchase program unchanged, noting that they agreed to stay prepared to provide additional support if necessary, with the options including a lower OCR. The Kiwi slid initially, perhaps as the statement may have revived speculation over negative interest rates by this Bank, but it was quick to rebound, recover the losses, and trade even higher, perhaps as investors started scanning the quarterly Monetary Policy Report, in which the economic forecasts showed the OCR turning higher from December.

NZD/JPY — Technical Outlook

NZD/JPY continues to run higher, while balancing above a couple of short-term upside lines. The slightly steeper one is drawn from the low of February 18th and as long as the rate stays above that line, we will stay a bit more confident with larger advances in the near term. Hence our positive approach for now.

As for the Rest of Today’s Events

During the European session, we get Germany’s final GDP for Q4, which is forecast to confirm its preliminary estimate of +0.1% qoq. In the US, new home sales for January are expected to have accelerated to +2.1% mom from +1.6%, while the EIA (Energy Information Administration) is expected to show that crude oil inventories fell 5.190mn barrels last week, after falling 7.258mn the week before. That said, bearing in mind that the API (American Petroleum Institute) reported a 1.026mn barrels gain, we would consider the risks of the EIA forecast as tilted to the upside.

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