HiFX Morning Update, September 21 2017

HiFX Morning Update, September 21 2017

The NZDUSD opens at 0.7351 (mid-rate) this morning.

This morning the Federal Reserve delivered on its promise to reduce its $4.5 trillion portfolio by allowing $10B in bonds to mature in October, without replacing them. The Fed’s portfolio with includes Treasury and mortgage-backed securities will be gradually reduced throughout 2018 with monthly reductions increasing to a maximum of $50B.

As widely expected the Federal Open market Committee kept the federal funds rate between 1.00% and 1.25% while at the same time confirming that they remain on track to hike rates at their December meeting. Fed officials continue to forecast three rate hikes in 2018 with interest rates expected to peak at 2.9% in 2020.

In reaction to an unchanged interest rate the USD fell sharply with the NZDUSD spiking to 0.7430 before the accompanying statement reversed the move.

This morning the expectations are for New Zealand’s Q2 GDP reading to increase by 0.8% from Q1’s 0.5% rise. It is worth noting that the past two readings have fallen short of expectations, but given that Q2 includes both the Masters Games and the British Lions rugby tours we would be surprised if today’s result was short of its forecast.

Global equity markets are mixed - Dow -0.02%, S&P 500 -0.02%, FTSE -0.05%, DAX +0.06%, CAC Closed, Nikkei +0.05%, Shanghai +0.27%.

Gold prices are down 0.7% trading at $1,300 an ounce. WTI Crude Oil prices are back on the front foot, up 1.9% trading at $50.43 a barrel.

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