RBNZ To Raise NZ Interest Rates Again Today

AUD

The AUD was trading within tight ranges against most major currency pairs, holding on for dear-life as downbeat sentiment has sent the Aussie on a downward trend over recent weeks. Asian Equities regained some recent losses with the ASX leading the charge with +0.8% gains, whilst the Shanghai Comp and Nikkei were up +0.2% and +0.1% respectively. Commodities were mixed with Iron Ore losing out -0.5% though Gold was up +0.2%. Little in the way of notable local data to start the week, with only some Preliminary PMIs yesterday which failed to move markets. The Markit Survey revealed the Australian economy grew at a faster pace in November, and is reflective of the positive effects from the continued easing of COVID-19 restrictions and decline in new cases. It was noted that supply chain issues featured strongly in the Australian PMI survey as delivery times lengthened, widespread shortages were reported and price increases continued to be seen. Another quiet day ahead domestically, though currency markets will be anticipating a rather busier day across the globe today with the RBNZ rate decision at midday today and a raft of USD data due tonight (see below)

USD

The AUDUSD was crabbing along sideways with no joy for either side of the market, trading at 0.7227 this morning. The downbeat market sentiment was well portrayed by US Equity markets which saw the Nasdaq fall by -0.9%, the S&P 500 was down -0.3% though the Dow Jones was the outperformer gaining +0.5%. Meanwhile, the US bond market sell-off continues; thus, Treasury yields keep rising after US President Joe Biden renominated Fed Chairman Jerome Powell to lead the Federal Reserve for the period ending in 2026. The US Dollar (via the DXY Index) is taking a breather this morning after the release of the preliminary November US Markit PMI reports. The preliminary November US Markit Manufacturing PMI met expectations, halting what had been a three-month slide in the index. However, the other two PMI readings, the Services and Composite came in below expectations, signalling that the US economy’s robust growth trajectory may have slowed in November. Tonight will see the release of multiple pieces of data ahead of the Thanksgiving long weekend, including October Durable Goods Orders, Q3 GDP, FOMC Meeting Minutes, and October Core PCE inflation in what could be a busy evening in currency markets.

EUR

The AUDEUR is trading slightly lower than the levels seen yesterday after some improving numbers out of the Eurozone, sitting at 0.6423 at time of writing. There was a basket of data released from Europe overnight with France, Germany and the EZ releasing their Flash Services and Manufacturing PMIs for November, all results printing better than expectations. The Eurozone Manufacturing Purchasing Managers Index arrived at 58.6 in November vs. 57.3 expectations and 58.3 last. The index hit two-month highs as manufacturing sector activity improved more than expected in the reported month. France’s Manufacturing PMI printed at 54.6 to beat estimates of 53.1, with Services at 58.2 beating expectations of 55.5. German Manufacturing was 57.6 compared to expectations of 56.9 with Services at 53.4 compared to expectations of 51.5. Little in the way of fresh data on the card tonight.

GBP

The AUDGBP also trading a tight range, sitting at 0.5398 this morning. The UK's version of Preliminary PMI data for November showed the Manufacturing measure unexpectedly improve to 58.2 in November versus 57.3 expected and better than October's prior 57.8. The same surprisingly positive outcome could be said for the Services reading which arrived at 58.6 versus October’s final readout of 59.1 and 58.5 expected. BoE Governor Andrew Bailey spoke yesterday and said that it would not be off the table for the BoE and its speakers to not provide future guidance on rate movements, and that decisions will be made on a meeting-by-meeting basis, adding to the blurriness in central bank world at the moment.

NZD

The AUDNZD trading at similar levels seen yesterday morning despite a brief uptick before returning to trade at 1.0395. Markets are anticipating that the RBNZ will hike interest rates for a second consecutive meeting at midday today, as it continues to pull back stimulus from an economy progressing quickly in its recovery efforts. Most forecasters are predicting a 25-basis point increase in the Official Cash Rate to 0.75%, with the potential for it to be an even larger move, but given the extent of economic uncertainty as COVID19 becomes endemic across the country and the fact that mortgage rates have ramped up over the past few months, a 25-point move is the more likely outcome.