HiFX Morning Update, March 21 2018

HiFX Morning Update, March 21 2018

The NZDUSD opens at 0.7192 (mid-rate) this morning.

The NZD is the weakest performing G10 currency coming under pressure after the spread between the New Zealand and US 10-year government bond yields turned negative for the first time since records began back in the mid-1990s.

Earlier this morning the latest Global Dairy Trade (GDT) auction resulted in another fall in dairy prices with the index down 1.25 following on from the previous 0.6% fall a fortnight ago. Whole Milk Powder was the only product to increase edging up 0.1%, while skimmed milk prices suffered the largest fall down 8.6%. Volumes were also down with 18,365MT’s selling at this morning’s auction down from 19,292 MT’s at the last event.

The USD has risen against all its rivals overnight as investors position their books ahead of tomorrow morning’s FOMC meeting. The Fed is widely expected to hike its benchmark by 25 basis points to 1.75% from the current 1.50%. Direction is likely to be driven by the following press conference and any revision to the Fed's dot-plot forecasts which showed three rate hikes for 2018 at the December meeting.

Overnight the ZEW Indicator of Economic Sentiment for Germany plummeted sharply in March with the index falling to 5.1 down 12.7pts from 17.8 in February. The fall was a direct result of global trade concerns following Trump’s announcement of possible tariffs.

A slowdown in UK inflation in February with consumer prices rising by an annual rate of 2.7% (exp 2.8%) and down from 3.0% in January has had little effect on the British pound, which continues to benefit from yesterday’s Brexit transition agreement.

Global equity markets are broadly higher - Dow +0.40%, S&P 500 +0.10%, FTSE +0.26%, DAX +0.74%, CAC +0.57%, Nikkei -0.47%, Shanghai +0.35%.

Gold prices have edged down 0.5% trading at $1,311 an ounce. WTI Crude Oil prices have risen sharply, up 2.2% over the past 24 hours, trading at $63.47 a barrel.

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