HiFX morning Update, January 24 2019

NZDUSD 0.6789 1.0%
NZDEUR 0.5961 0.7%
NZDGBP 0.5196 0.2%
NZDJPY 74.38 1.2%
NZDAUD 0.9511 0.8%
NZDCAD 0.9069 1.0%
GBPNZD 1.9246 -0.2%

The NZD has pushed higher against all its rivals, after yesterday’s inflation data printed marginally ahead of expectations.

The Consumers Price Index for the December quarter came in at 0.1% with the annual pace holding steady at 1.9% and although the result fell short of the RBNZ’s 0.2% and 2.0% forecasts, investors had front run the announcement and positioned their books for a weaker outcome.

The 1.9% reading puts inflation close to the RBNZ’s mid-point of a 1%-3% target range and combined with our strong employment data (the other half of the RBNZ’s dual mandate) mitigates the possibility of an interest rate cut.

The JPY is the weakest performing of the G10 currencies after the BoJ downgraded its inflation and growth forecasts at yesterday afternoon’s monetary policy meeting. As expected the central bank kept its monetary policy unchanged with the Board voting to continue to purchase government bonds keeping yield of 10-year JGBs close to zero. GDP growth outlook for the fiscal year ending March this year was downwardly revised to 0.9% from 1.4%, with both headline and core inflation for the fiscal year ending March 2019 to 0.8% from 0.9%.

The British pound is trading at two-month highs against both the USD and EUR with the threat of a 'no deal' Brexit becoming less likely. According to media reports some MP’s are looking for reasons to back May’s new deal if she can win more concessions from the EU over the Irish border, rather than face the growing likelihood that Brexit will be delayed or possibly reversed. The DUP has agreed to back the new deal if it includes a time limit to the backstop.

The Canadian dollar is trading lower after both retail sales and core retails declined more than expected in November. Retail sales were down 0.9% (exp -0.6%) while core retail sales which exclude automobiles fell 0.6% (epx-0.4%).

Overnight, tonight the European Central Bank (ECB) are widely expected to keep interest rate and forward guidance unchanged. This afternoon the NZDAUD cross rate direction will be dictated by Australia’s monthly employment report.

Global equity markets continue to struggle, Dow -0.05%, S&P 500 -0.41%, FTSE -0.85%, DAX -0.17%, CAC -0.15%, Nikkei -0.14%, Shanghai +0.05%.

Gold prices are inching higher, trading at $1,285 an ounce. WTI Crude Oil prices are have edged lower, down 0.4% trading at $52.59 a barrel.

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