Market Update 15/08/2024

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Stocks showed mixed performance. The S&P 500 rose by 0.3%, while the Euro Stoxx 50 and FTSE 100 ended the day up 0.7% and 0.6% respectively. US markets are currently factoring in about a 35 bps rate cut for the Fed’s September meeting and around 104 bps of cuts for 2024. The yield on the US 10-year dropped by 2 bps to 3.83%.
 
The focus offshore was the US CPI, with both the headline and core measures increasing by 0.2% month-on-month, as expected. This confirms the ongoing disinflationary trend, keeping the Fed on course for a rate cut in September.
 
The USD weakened, and bond yields declined in most developed Northern Hemisphere markets.
 
NZDUSD dropped sharply following the RBNZ’s rate decision yesterday. The initial reaction to the 0.25% cut saw NZDUSD fall from 0.6070 to around 0.6030. During the 3:00 pm press conference, dovish comments, including the mention of a possible 50 bps cut, pushed NZDUSD further down to around 0.6000 overnight. Support is expected around 0.5980, but if the USD remains strong and negative sentiment towards the NZD persists, recent lows near 0.5850 could come into play. Any further weakness in New Zealand’s economic data could accelerate the decline initiated by the RBNZ.
 
NZDAUD had a mixed performance and traded lower to 0.9060 at Wednesday’s lows. The narrowing yield gap between New Zealand and Australia, along with diverging policy directions from the RBA and RBNZ, is putting pressure on the NZDAUD rate. While it’s too soon to say for certain, this could potentially trigger a downward move in NZDAUD. However, the ongoing slowdown in China, which may continue to impact the AUD, is currently providing some support.
 
NZDGBP has dropped from 0.4725 to 0.4676. UK July headline CPI inflation increased to 2.2% y/y, and core inflation rose to 3.3% y/y, both slightly below expectations, after staying at the Bank of England’s 2% target for the previous two months.
 
Today’s economic calendar includes New Zealand’s July price indicators at 10:45 am, offering preliminary insights into Q3 CPI, along with monthly card spending figures. On the international front, Australian labor market data will be released at 1:30 pm, expected to show a slight cooling with the unemployment rate remaining at 4.1%. At 2:00 pm, China will release data on retail sales, industrial production, and fixed asset investment. Later in the evening, we’ll see UK GDP figures, and the US will report on monthly retail sales and jobless claims.

Here are the latest mid-market rates:

NZD/USD 24 HOURS 

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