HiFX morning Update, August 2 2018

The NZDUSD opens at 0.6789 (mid-rate) this morning.

As expected following a two-day meeting the Federal Reserve kept the federal funds target rate range unchanged at 1.75% -2.0%.

In the accompanying statement the Fed noted that the labour market continues to strengthen and that "economic activity has been rising at a strong rate." In the previous statement the Fed had described the increase in economic activity as solid. The tweaks to this morning’s statement were more than likely driven by Friday’s GDP data which put Q2 growth at 4.1%.

Prior to this morning’s FOMC announcement investor sentiment turned negative after Bloomberg reported that President Donald Trump's administration is considering raising the proposed tariff on $200 billion worth of Chinese imports to 25 percent from the 10 percent announced last month. As result risk-linked currencies along with commodity prices and equity markets slipped lower.

Last night’s US data sent mixed signals to investors with private sector employment exceeding market expectations while at the same time construction spending and manufacturing activity data releases disappointed.

The ADP private sector employment increased by 219k jobs in July (exp 185k jobs) with June’s jobs increase upwardly revised from 177k jobs to 181k jobs.

The Commerce Department reported construction spending in July fell by 1.1% (exp +0.3%) while for the same month the ISM purchasing managers index fell to 58.1 (exp 59.5) after unexpectedly climbing to 60.2 in June.

Tonight all eyes will be on the BOE rate announcement with a 25 basis point hike all but priced in. Should the Central Bank deliver this hike investors will look to the accompanying statement keen to learn if this is likely to be a one and done hike, or the first of a series of hikes.

Global equity markets with the exception of the Nikkei are in the red, - Dow -0.36%, S&P 500 -0.21%, FTSE -1.24%, DAX -0.53%, CAC -0.23%, Nikkei +0.86%, Shanghai -1.80%.

Gold prices have edged down 0.3%, trading at $1,220 an ounce WTI Crude Oil prices are down a further 2.2% trading at $66.33 a barrel.

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