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Morning All,
US equities hit a record high during the day but gave up most of the gains, ending nearly flat in the afternoon as markets focus on tomorrow’s FOMC meeting. The S&P 500 slipped 0.1%, erasing gains from the previous session. In Europe, the Euro Stoxx 50 climbed 0.7% and the FTSE 100 gained 0.4%. Meanwhile, the yield on the US 10-year Treasury increased by 2 bps to 3.64%.
US retail sales rose by 0.1% in August, surpassing expectations of a 0.2% drop. This comes after a 1.1% increase in July, indicating that consumer spending remains strong. Core retail sales were up 0.2% for the month, while the retail control group saw a 0.3% rise in line with the forecasts.
The DXY (dollar index) rose slightly as market expectations for a large 50bp Fed rate cut tomorrow somewhat eased, following stronger than expected US retail sales and industrial production data.
NZDUSD remains steady, holding below 0.6200. A 50 bps move could push the NZD higher, while a 25 bps shift might have the opposite effect. Anticipated resistance levels are 0.6225, 0.6255 and 0.6300, with support around 0.6100-10 and then 0.5975.
NZDAUD has dipped toward 0.9150 in the offshore session. A 50 bps Fed cut could trigger a further sell-off if markets anticipate the RBNZ following suit in three weeks. However, a larger Fed move might spark speculation that the RBA will have to reconsider its stance against rate cuts, particularly with signs of a weakening labour market in Australia. This could pose a greater risk to short-term NZDAUD gains. Tomorrow’s NZ GDP and Australian employment data will also be key.
NZDJPY has been performing strongly this week, but a dovish Fed decision could boost JPY further. With the Bank of Japan’s upcoming meeting also in focus, even if the BOJ keeps its policy unchanged as anticipated, reinforcing its hawkish stance could strengthen the yen.
The attention is on tomorrow’s Fed rate decision and updated economic forecasts. Most economists expect a 25bps cut, though the market is still factoring in a notable possibility of a larger 50bps cut.
Here are the latest mid-market rates:
| Currency Pair | Mid-market rate |
| NZD/USD | 0.6183 |
| NZD/AUD | 0.9152 |
| NZD/JPY | 88.03 |
| NZD/CNY | 4.3951 |
| NZD/EUR | 0.5564 |
| NZD/GBP | 0.4700 |
| NZD/HKD | 4.8189 |
| NZD/SGD | 0.8017 |
Chart of the Day
