HiFX Morning Update, May 25 2017

HiFX Morning Update, May 25 2017

The NZDUSD opens at 0.7048 (mid-rate) this morning.

Markets traded tight ranges ahead of this morning’s FOMC minutes with the Dollar Index (DXY) edging higher.

Overall the latest FOMC minutes contained few surprises. The market is now pricing in an 83% chance that the Fed will announce a modest hike in interest rates at their next meeting on the 14th June. Although FOMC voters added the caveat that “it would be prudent” to wait for evidence that a recent slowdown in economic activity had been transitory. “Most participants judged that if economic information came in about in line with their expectations it would soon be appropriate for the committee to take another step in removing some policy accommodation.” Policy makers also backed a plan that would gradually shrink their $4.5 trillion balance sheet.

Overnight the National Association of Realtors reported US existing home sales fell by 2.3% to an annual rate of 5.57 million in April after spiking by 4.2% to a ten-year high of 5.70 million in March. Economists had forecast sales to fall to a rate of 5.65 million.

ECB President Mario Draghi acknowledged the euro zone’s best economic growth run in a decade “and this will of course be fully reflected in our future decisions,” while at the same time he urged caution, arguing “that economic output will not reach the currency bloc’s potential before the end of next year and that wage growth is not reassuring.” Draghi went on to state that “inflation remains weak so there is no need to deviate from the policy path already laid out.” The ECB’s next policy meeting is on the 8th June.

The highlight for the NZD today will be our annual budget due to be released at 2:00pm.

Global equity markets have turned positive - Dow +0.31%, S&P 500 +0.08%, FTSE +0.40%, DAX +0.19%, CAC +0.32%, Nikkei +0.72% Shanghai +0.07%.

Gold prices are unchanged trading at $1,254 an ounce .WTI Crude Oil prices have edged down 0.3% to be trading at $51.33 a barrel.

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