NZ and Canada to Raise Interest Rates Today

AUD

The Australian Dollar moved away from recent lows on Tuesday evening and now trades with modest gains across the board. Asian Equities were largely in the red, closing at their lowest level in two years with the Nikkei shedding -1.8% and the Shanghai Comp dipped -1% on the close. Investors placed worry in the fact that a growing number of Chinese cities, including the commercial hub Shanghai, are adopting fresh Covid-19 curbs from this week to rein in new infections after finding a new and highly transmissible Omicron subvariant. Domestically, the Australian Share market finished the day up on Tuesday by around +0.06%. To the data ahead, the Asian session today will focus on the RBNZ Policy across the ditch. There are expectations that the RBNZ will increase their OCR by 50bps to 2.5%. Given there is a follow-up monetary policy committee meeting in August, the chances of a 75bps hike are relatively low in expectations. Elsewhere, the latest US consumer inflation figures are due to be published this evening.

USD

AUDUSD pair bounced off a two-year low on Tuesday amid a modest US dollar pullback, with the pair trading at a rate of 0.6754. US Equities shed their early gains and ended broadly lower on Tuesday as investors brace for a big week of inflation news, the S&P 500 fell -0.9%, extending to a three-day losing streak. The Dow Jones slid -0.6%, and the Nasdaq shed -0.9% on the close. Crude oil fell 8% and under $100 a barrel while U.S yields edged fractionally lower ahead of tonight’s inflation report. It was a quiet on the data front as markets prepare for this evening. US CPI will be released in what is the main event tonight and there is evidence that broad based inflation has remained apparent with gas prices rising by +10% MoM in June. Adding to this, traders will further take cues from the US Retail Sales data and the Preliminary Michigan Consumer Sentiment scheduled on Friday. The Fed Reserve will be watching these figures closely which will play a part in their next interest rate decision at the end of the month.

EUR

AUDEUR gained positive bid tone to climb upwards of 30bps, trading as high as 0.6733 at the time of writing. European Equities gained ahead of a key earnings season; the French CAC gained +0.8% on the close while the German DAX gained a modest +0.6%. During the European Session, the EU and German ZEW Surveys of Economic Sentiment missed expectations, sparked by the bloc’s energy crisis. German July ZEW investor expectations were -53.8, missing expectations of -40.5 and sharply down from June’s -28 with the result the worst since November 2011. To the data ahead, the Eurozone economic docket will feature a flurry of releases with the Industrial Production for the Eurozone, French CPI as well as German WPI inflation rate.

GBP

AUDGBP found support overnight and bounced off a weekly low of 0.5650 to trade at a rate of 0.5681 at the time of writing. FTSE 100 closed ahead on Tuesday as traders decided to shake off the potential recession blues for now. The London benchmark closed modestly up 13 points (+0.18%). There was little to report on with the absent UK economic docket. Ongoing political turmoil after the accountment of resignation by current PM Boris Johnson has spooked the sentiment of market participants, the list for being the leader of the conservative party grows wider each day. Apart from this, investors will focus on the upcoming UK GDP figures as well as a flurry of Industrial and Manufacturing data this evening.

NZD

AUDNZD followed suit to trade higher this morning after dipping below the 1.10 handle overnight, as the pair trades at a rate of 1.1022 this morning. AUDNZD traders will have a busy day today as the RBNZ and the US CPI for June on the cards. There are expectations that the RBNZ MPC members will deliver another 50bps increase in the OCR, taking it to 2.5%, a level broadly associated with the neutral level of monetary policy. However, economist have stated that taking the policy neutral is unlikely to satisfy the MPC members. While the RBNZ is up for a 0.50% rate hike, their Rate Statement will be critical for the pair traders to watch.