Sunday, 18 October 2009

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More importantly, though, the data would highlight that inflation remains well below the ECB’s 2.0 percent inflation target. If Eurostat confirms this at 5:00 ET, or revises the results to the downside, the euro could pull back sharply. On the other hand, if CPI is higher than anticipated, the currency could gain as the markets will speculate that the central bank may pause in their efforts to make monetary policy more accommodative.Canadian Dollar the Strongest of the Majors, New Zealand Dollar Faces CPI on ThursdayThe Canadian dollar beat out all of the majors on Wednesday, as the currency rallied 1.3 percent against the New Zealand dollar, Swiss franc, and Japanese yen. The currency also gained almost 1 percent versus the greenback as USD/CAD extended its bearish break from a multi-month triangle formation. The Australian dollar also held up fairly well, but the New Zealand dollar was hit hard and fell against every major currency, with the exception of the low-yielding Japanese yen and Swiss franc.Pairs like NZD/USD could come under further pressure during the next 24 hours as New Zealand's consumer price index is forecasted to have risen 0.3 percent during Q1, which would bring the annual rate down to a more than one year low of 3.0 percent from 3.5 percent. During Q4 2008, prices contracted for the first time in two years and by the most in ten years, so unless we see another surprise contraction during Q1, the news may not add to speculation that the Reserve Bank of New Zealand will cut rates again during their next meeting on April 29. As it stands, a Bloomberg News poll of economists is reflecting expectations for a 50 basis point cut to 2.50 percent, while Credit Suisse overnight index swaps are forecasting a 25 basis point reduction to 2.75 percent. As a result, this upcoming inflation report could be highly market-moving for the New Zealand dollar, but if inflation pressures prove to be stronger than anticipated, the currency could rally.Related Articles:

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