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NZD and Pound Take Another Hit

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The NZD fell strongly against its Australian counterpart in trading yesterday. The NZD declined on the back of a worse than anticipated release of New Zealand’s PPI figures. The release showed that Producer Prices fell for both inputs of productions and the final output, with inputs falling -1.0% and outputs -0.5%. The decline indicated a clear miss in economists’ expectations for the data points, which were expected to be increases of 0.7% and 0.8% respectively. The release of inflation expectations also lagged expectations at 2.2%, falling short of a forecast 2.4% and further weighing down the Kiwi.

The movement in AUDNZD was accentuated by the release of the RBA’s Monetary Policy Meeting Minutes. The minutes showed some growing caution about forecasts, and indicated that recent higher inflation figures were unlikely to prevent inflation remaining within the 2-3% target band. AUDNZD rallied around 85 pips yesterday before retracing half of the move in the overnight session. This morning’s testimony by RBA Governor Stevens did not provide a clear direction for the currency.

The Pound was hit by another wave of selling last night on the release of UK CPI figures. The data showed that both the CPI and HPI measures declined from last month, missing expectations. Analysts had forecast a reading of 1.8% and 11.2% for CPI and HPI respectively, but the results came out lower at 1.6% and 10.2%. The poor results shocked the market, with the pound falling just over a cent against the US Dollar yesterday. Pound traders have had a rude shock this month.

After Governor Mark Carney had indicated that interest rate rises were likely to occur sooner than expected, the rhetoric and data recently has indicated that the original expectations might not have been misguided. The Pound has declined over five cents against the US Dollar since July. Still to come tonight will be the release of the Monetary Policy Committee’s Bank Rate Votes, which are not expected to change from a unanimous hold vote.

For the rest of the week it is likely the major focus will be on tonight’s FOMC meeting minutes as well as the Jackson Hole Symposium which is scheduled for the end of the week. Expectations have are that the meeting minutes will not surprise the market and the Fed is likely to remain on course to conclude its tapering in October. Speeches coming out of Jackson Hole are more of a wild card, with economists still unsure whether to expect any surprise policy shifts at the meeting.

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