USD Keeps Gaining on Powell’s Reappointment, NZD Slides After RBNZ Hikes

Lockdown Measures in Europe and Powell’s Nomination Keep Sentiment Subdued

The US dollar continued trading north against most of the other major currencies on Tuesday and during the Asian session Wednesday. It underperformed slightly against CAD, JPY, and EUR, while it eked out the most gains versus NZD.

S&P 500 — Technical Outlook

The S&P 500 cash index traded somewhat higher yesterday, after it hit support at the crossroads of the 4655 barrier, and the upside support line drawn from the low of October 6th. Despite the prior slide in the aftermath of hitting a record of 4744 on Monday, given that the index remains above the upside support line, we still see a positive near-term outlook.

Kiwi Slides Despite RBNZ’s Hike, Turkish Lira Collapses on Erdogan’s Remarks

Now, back to the FX world, the Kiwi was the main loser among the majors, despite the RBNZ hiking rates for a second month in a row. Remember, that we’ve been expecting such a reaction. Market pricing was aggressive heading into the meeting, with participants assigning a 40% chance for a 50bps hike. However, due to problems in other major economies, including China, which is New Zealand’s biggest trading partner, we saw the case for only one quarter-point hike, and this is what the Bank delivered. “At the moment, with everything we have in our hands, we see steady steps of 25 basis points back to levels where the OCR is marginally above the neutral rate as the most balanced approach we can take,” Governor Adrian Orr said after the decision, which may have disappointed those expecting a more aggressive future rate path as well.

NZD/USD — Technical Outlook

NZD/USD slid overnight after the RBNZ disappointed those expecting a “double cut”, and at the time of writing the rate is hovering slightly below the 0.6910 barrier, which is marked by the low of October 8th. The pair has been printing lower lows and lower highs below a downside line since November 9th, and thus, we will consider the short-term picture to be negative.

As for the Rest of Today’s Events

Today, the FOMC releases the minutes of its latest policy gathering, but bearing in mind that we already heard views of several policymakers after the gathering, we will treat the minutes as outdated. We prefer to focus more on upcoming data and remarks to see whether the chances of a hike mid-2022 remain elevated. In that respect, we will pay attention to the personal income and spending data for October, which come out alongside the core PCE index for the month ahead of the minutes. Despite not being a major market mover, as we have other inflation gauges, like the CPIs, being already released, the PCE index is the Fed’s favorite inflation metric.

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