Carney’s remarks hit Sterling
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During Mark Carney’s speech in front of London’s banking community, the Governor of the Bank of England made a significantly dovish statement. According to him, now is not the time to raise rates.
The other theme of the day was a continuation of the US Dollar rally on the back of further hawkish comments from the FOMC members. Boston Fed president Rosenberg warned about the risks to financial stability from keeping rates too low. In the absence of significant macroeconomic news, traders used this hawkishness as an excuse to send the Dollar higher against all G10 currencies except the New Zealand Dollar.
Today should be relatively light in terms of macroeconomic news, after Carney’s testimony it might be worth taking a look at BoE’s Haldane speech at midday. Late at night the Reserve Bank of New Zealand June decision is due. We expect no change in rates and a stern warning against excessive currency strength after the sharp rally in the Kiwi since the May statement.
The Dollar ends higher despite neutral comments from FOMC officials
Yesterday’s comments from the Federal Open Market Committee members were neutral to hawkish. During his visit in Amsterdam, Eric Rosengren emphasised on the risk that are associated with maintaining low-interest environment. In his view such environment poses financial stability issues and make it harder to fight future recessions. It seems like FOMC remains mostly optimistic, with just one member, Evans, calling for very gradual rate of monetary tightening. Today we await existing home sales numbers out from the US.
Euro falls to the lowest level in three weeks versus the Dollar
In the absence of any new significant releases, the common currency continued trending downwards, falling to its lowest level since the end of May. Euro did, however, bounce on Sterling’s weakness and ended the day appreciating versus the Pound and some of its European peers
Wednesday should be very quiet in terms of macroeconomic data from the Eurozone, investors will take interest in events elsewhere while awaiting new PMI prints expected on Friday.
RNBZ expected to hold rates steady
The Reserve Bank of New Zealand is expected to remain the official cash rate at 1.75 percent. Investors will be watching for any potential comments regarding recent NZD strength and the potential for future rate hikes in a context of disappointing recent economic growth and significant NZD appreciation that will likely not be welcome by the RBNZ.