HiFX Morning Update, May 24 2018

The NZDUSD opens at 0.6919 (mid-rate) this morning.

Renewed risk-off sentiment hit markets yesterday afternoon after Donald Trump tweeted that he was not happy with the China trade negotiations so far, despite China reducing import tariffs on autos, and that there was a “substantial chance” that the proposed summit with North Korea in June "would not work out". European equity markets along with the EUR have been the worst affected with uncertainty over the political situation in Italy weakening sentiment in the region further.

UK inflation disappointed with the Office for National Statistics reporting consumer prices climbed 2.4% y/y in April. The result was short of the expected 2.5% rise and is the slowest pace in 13mths.

Euro-zone private sector growth slowed for the fourth consecutive month with the flash survey for May falling to an 18mth low of 54.1 from April’s final reading of 55.1. The index was expected to remain unchanged.

This morning’s FOMC minutes have been deemed to be slightly dovish with both the USD and treasury yields falling following the release. Although the Fed all but confirmed that they will hike rates in June followed by another in September commenting that “it would likely soon be appropriate for the Committee to take another step in removing policy accommodation,” they went on to state that “they will tolerate above-target price growth for the foreseeable future as ‘a temporary period of inflation modestly above 2 percent would be consistent with the Committee's symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations at a level consistent with that objective,” denting hopes of a possible fourth hike this year.

Global equity have fallen sharply- Dow -0.27%, S&P 500 -0.23%, FTSE -1.13%, DAX -1.47%, CAC -1.32%, Nikkei -1.18%, Shanghai -1.41%.

Gold prices are unchanged trading at $1,292 an ounce. WTI Crude Oil prices are down 1.0% trading at $71.55 a barrel.

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