As expected, the Reserve Bank
of New Zealand
last night (GMT) raised the Official Cash Rate to 3%. In the press statement
accompanying the decision, the governor, Graeme Wheeler, ticked all the boxes
in terms of why such a move might be necessary: NZ economic expansion continues
apace – GDP is estimated to have grown by 3.5% in the year to March; prices for
NZ export commodities remain high; nett immigration continues to increase,
which is boosting housing demand; consumer and business confidence remains
high; and inflationary pressures are becoming apparent.
The rise in NZ rates comes
hard on the heels of the announcement of the lower than expected inflation ratein Australiayesterday. All of this bodes well for a short position in the AUDNZD pair,
which was entered by the OmiCronFX Mandelbrot routine last night, on the price
move that took place after the RBNZ announcement.
Forex market wants action, not talk on Euro strength
Mario Draghi speaks later today
in Amsterdam
and the Forex market is primed for more rhetoric from him that will be designed
to reduce the value of the Euro. This is expected to reinforce the possibility
of some form of Quantitative Easing (QE) in the Euro zone.
However, if past experience is
anything to go by, talk alone will not solve the problem that the ECB perceives
in a strong euro. Those institutions with the power to move the market are
waiting for action, rather than talk. They also know that conventional means of
affecting QE, the purchase of sovereign bonds, is a much more difficult
proposition in the Euro zone than it is in either the US or the UK . This is because there is no such
thing as a Euro bond, and splitting purchases in an effective manner between
the separate states, who all issue their own bonds, is known to be difficult.
It will be interesting to
hear what the ECB chief has to say later today in the Netherlands .
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