Dollar Rises, Kiwi Lags Ahead of Domestic Rates
The greenback rose against nearly all peers in the Group of 10 as Federal Reserve policymakers are seen favoring keeping US interest rates on hold. The New Zealand dollar lagged behind peers ahead of the Reserve Bank of New Zealand meeting, where policymakers are widely expected to lower interest rates by half a percentage point.
The Bloomberg Dollar Spot Index traded 0.2% up, its first gain in four days
San Francisco Fed President Mary Daly said policy needs to remain restrictive until there’s more progress on inflation, which she expects will continue declining over time
Earlier, Fed Governor Christopher Waller said recent economic data support keeping interest rates on hold and characterized the economy as solid, with a labor market that is in a “sweet spot”
NZD/USD fell 0.6% to 0.5702, biggest drop since Feb. 12
“If the commentary from officials is carried in a good mood about where the economy is, the decision to cut may not affect NZD as much while we also wait to hear about plans for slashing rates or slowing down,” strategists at Monex wrote in a note
USD/CAD traded near flat 1.4187, curbing its earlier advance of 0.2%
Consumer prices reaccelerated for the first time in three months as the Bank of Canada’s preferred core measures are proving sticky
“USD/CAD is vulnerable to more upside supported by FED-BOC policy trend and trade uncertainty,” said Elias Haddad, senior markets strategist at Brown Brothers Harriman & Co.
GBP/USD down 0.2% to 1.2596; cable only met brief support from data showing UK pay growth picked up to its highest level in eight months and employment unexpectedly rose
Traders trimmed the amount of Bank of England interest-rate cuts priced into money markets
“Growth looks to be bouncing in early Q1, which could imply upside risks to CPI tomorrow,” team of strategists at Canadian Imperial Bank of Commerce wrote
“The cautious policy language and incoming data, supports a continued paring in March rate cut expectations,” Jeremy Stretch of CIBC wrote about BOE. EUR/GBP to test the 0.8271 level, “should CPI further compromise March cut dynamics,” he said
EUR/GBP fell 0.2% to 0.8290 Tuesday
EUR/USD traded weaker for a second day, falling 0.4% to 1.0442; the technical outlook urges caution to bulls
The selloff across European bond markets is compressing the yield gap between Italy and Germany to the smallest in three years as investors brace for a deluge of military spending
Bank of America Corp. sees some near-term weakness in EUR/USD but a rally later in the year
A lot of negatives are already in the price, so the pair to rally to 1.10 by year-end as “upside risks (Russia-Ukraine resolution, German fiscal rethink, scope for structural reforms) are under appreciated,” wrote strategists at the bank
AUD/USD traded 0.1% weaker to 0.6349, after falling as much as 0.3% after the Reserve Bank cut the key rate by 25 basis points to 4.1%, that is first cut in four years
“I want to be very clear that today’s decision does not imply that further rate cuts along the lines suggested by the markets are coming,” RBA Governor Michele Bullock said during the press conference
“AUD/USD remains the best G-10 expression for a China recovery - we are bullish medium-term but await clarity on US tariffs against China,” Adarsh Sinha, a FX and rates strategist at Bank of America, wrote in a note. “The upside risks to China sentiment are growing especially if the upcoming National People’s Congress surprises positively”
USD/JPY rose 0.4% to trade at 152.05
Source : Bloomberg
