HiFX morning Update, August 3 2018

The NZD opens down at 0.6746

The USD has strengthened steadily as the market digested yesterday’s FOMC statement. Although they left rates on hold, they noted the economy was growing at a ‘Strong rate’. They also reiterated their expectations of future gradual rate increases. Although both these points are by no means breaking news, they further reiterated the gulf between the Fed, and antipodean central bank thinking.

The Bank of England raised rates overnight, with the official bank rate increasing to 0.75%. Initially this saw some GBP strength, and a quick spike in the Pound. This was very short lived however, as Carney come out saying “Don’t assume bank rate will rise to 2-3%”. He said a lot of positive data would need to come out before that happened, and that a rough guideline of future increases were about once a year.

Also note, we have had almost 2 months of market consolidation with little movement either way. What can tend to happen when the recent range is eventually broken, is that it can break quite suddenly and aggressively.

Excluding the US, Global equity markets down fairly heavily- Dow 0.03%, S&P 500 0.56%, FTSE -1.01%, DAX -1.50%, CAC -0.68%, Nikkei -1.03%, Shanghai -2.00%.

Gold prices have edged down 0.2%, trading at $1,217 an ounce, the lowest in a year. WTI Crude Oil prices are up sharply, 4% higher, trading at $68.99 a barrel.

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