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Market Update 12/07/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

Equity markets, despite being near their highest levels ever, didn’t see significant increases because of worries about corporate earnings. Meanwhile, bond yields fell significantly after US CPI inflation data increased expectations of rate cuts. As a result, the yield on the US 10-year bond decreased by 9bps to 4.19%.
 
US CPI for June was lower than expected. The overall CPI decreased by 0.1% for the month (compared to an expected 0.0%), and core CPI increased by 0.1% (Compared to an expected 0.2%). This lowered the annual overall CPI to 3.0%. In core CPI, the shelter index went up by 0.2%, with rents for primary residences and owner-equivalents both decreasing. Medical care services increased by 0.2%, while transportation services decreased by 0.5% due to a drop in airline fares. The super core CPI, which excludes housing services, fell by 0.05% for the second month in a row. On a 3-month annualized basis, core CPI is now at 2.1%, and super core CPI is at 1.3%. The market is now expecting a Fed rate cut at the 18th September FOMC meeting, with two more cuts likely by the end of 2024.
 
The USD weakened following the CPI release, but this change was mostly reversed within a few hours. After the buzz from the Monetary Policy Review, global developments might take centre stage for the rest of the week.
 
NZDUSD climbed to just under 0.6135 overnight before falling back to just below 0.6100. The pair isn’t making significant moves as both the NZD and USD are aligned with their central banks, which appear likely to cut rates soon. Currently, support at 0.6050 seems strong, with resistance around 0.6150-70 and then 0.6210-20. Upcoming data will be crucial.
 
NZDAUD has stabilized around 0.9020 after dropping following the RBNZ MPR. It has been testing lower due to the differing outlooks for the RBNZ (expected cuts) and the RBA (possible extended hold or hike). The upcoming CPI releases (NZ on 17th July and AU on 31st July) will be important to watch.
 
NZDJPY has dropped below 97.00. Meanwhile, USDJPY was a major mover overnight, dropping by around 4 big figures at one point from 161.55 to 157.45. The market is speculating about possible intervention, but Japanese officials as usual are not confirming or denying anything.
 
NZDGBP is testing its lowest levels in two months around 0.4725. The GBP is performing well, backed by recent data showing a stronger-than-expected 0.4% increase in monthly GDP for May. This puts the GBP on course for another strong quarterly performance following a solid Q1. Against the USD, the GBP has maintained levels above 1.2900 after reaching a peak near 1.2950 earlier.
 
Today’s domestic releases include Business NZ manufacturing PMI at 10:30am and NZ June card spending at 10:45am. Additionally, China’s trade data and US releases like the Producer Price Index (PPI) and the University of Michigan consumer survey will be featured. The US PPI release is particularly significant as it will provide more clarity on estimates for the core US PCE deflator, a crucial measure the Federal Reserve aims to stabilize around 2.00%.
 
Here are the latest mid-market rates:

Currency PairMid-market rate
NZD/USD0.6092
NZD/AUD0.9013
NZD/JPY96.91
NZD/CNY4.4275
NZD/EUR0.5607
NZD/GBP0.4717
NZD/HKD4.7562
NZD/SGD0.8186

NZD/USD 24 HOURS 

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