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NZD/USD Fundamental Forecast – July 29. 2016

By:
Barry Norman
Published: Jul 28, 2016, 04:21 UTC

The NZD/USD added 32 points to trade at 0.7108 as the greenback weakened after the FOMC statement on Thursday. Commodity currencies such as the kiwi are

NZD/USD Fundamental Forecast – July 29. 2016

The NZD/USD added 32 points to trade at 0.7108 as the greenback weakened after the FOMC statement on Thursday. Commodity currencies such as the kiwi are gaining on hopes of additional stimulus from Japan. The Fed left its target interest rate in a range of 0.25 percent to 0.5 percent as expected and said near-term risks to the US economic outlook had diminished and the labour market had improved, suggesting it will raise rates later this year. The Fed statement kept alive bets that the central bank could raise rates as soon as September, although a Reuters survey suggests it will wait until December.

“Overall, we’d say the Fed is buying time, and not trying to point the market toward an imminent hike, but our view of a hike by year-end seems on track,” said Kimberly Martin, senior market strategist at Bank of New Zealand. After Japan’s Prime Minister Shinzo Abe unveiled his stimulus package “the market is now speculating whether this will be complemented by an announcement of further monetary stimulus from the Bank of Japan tomorrow.”

Japan’s Nikkei fell 0.7%, hurt by a stronger yen and nerves before the Bank of Japan’s (BoJ) monetary policy decision on Friday.

“The best-case scenario for the market is that the BoJ decides to increase government debt purchases without cutting interest rates further into negative territory,” said Hikaru Sato, a senior technical analyst at Daiwa Securities in Tokyo.

“But the BOJ can’t save face if it does not cut rates into negative territory after it introduced the negative interest rate policy (in January), so we need to brace for such possibility, too.”

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Upcoming Economic Events that you should be monitoring:

Friday, July 29, 2016

Currency Name Volatility Previous Consensus
JPY BoJ Interest Rate Decision 3 -0.1 -0.2
JPY BoJ Monetary Policy Statement 3
EUR Gross Domestic Product YoY) 3 1.7 1.6
EUR Gross Domestic Product (QoQ) 3 0.6 0.3
EUR Consumer Price Index (YoY) 3 0.1
EUR Consumer Price Index – Core (YoY) 3 0.9

Government Bond Auctions

Date/Time Country Type

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction

 

 

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