Market Update 21/05/2024

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Currency markets have consolidated and not showing much movement. Equities began the week on a positive note as bond yields slightly increased. The US 10-year yield rose by 1.8bps to 4.44%. Fed committee members spoke overnight, emphasizing that a single lower inflation report isn’t enough to declare that inflation is under control.
 
Overnight NZDUSD briefly dropped below 0.6100 and is currently trading just above 0.6100 following its strong performance last week. The market is likely to stay quiet ahead of the RBNZ meeting, so we’ll most likely be influenced by international trends. Tomorrow’s RBNZ meeting could be challenging, with attention on the OCR forecast. The last Monetary Policy Statement included a 0.10% hike, despite a less aggressive stance, and the focus will be on whether they move this or keep it in.
 
AUDUSD has dropped to 0.6670, and the NZDAUD is at 0.9155. This afternoon, the focus will be on the RBA minutes at 1:30pm NZT, which will provide more insight into their May decision, it will be a key information for AUD and the NZDAUD exchange rate. Recently the NZDAUD has significantly influenced the NZD, and it may have reached its highest point after rebounding from the recent lows.
 
JPY has also weakened, with USDJPY rising above 156. The NZDJPY remains in an uptrend at 95.42 and is testing its upper limits. This could be a good opportunity for importers to take advantage and top up their hedging requirements.
 
EUR & GBP have shown little change since last week’s close. Bank of England (BoE) deputy Governor Broadbent indicated that the central bank might cut interest rates sometime over the summer if the current trends continue. The market is pricing a chance of 25bps rate cut at the next meeting in June, with a full rate cut by August meeting.
 
Canadian CPI data will be released tonight. If the data prints weaker inflation as expected, it could strengthen the belief that a rate is imminent. Currently, the likelihood of a rate cut in July is considered higher than in June. Additionally speeches from Fed Governor Waller & BoE Governor Bailey will be of interest to the market regarding central bank sentiments.
 
There isn’t much activity on the local data calendar. Credit Card Spending data will be released at 3:00pm. In Australia, Westpac consumer confidence figures will be published at 12:30pm, followed by the release of RBA minutes at 1:30pm.


 Here are the latest mid-market rates:

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