Global Themes


US inflation softens in November

Headline CPI dragged lower by energy price falls in November.

US consumer price inflation dropped back to a 2.2% annualised print in November, as large drops in fuel and energy prices eased pricing pressures on households. Core inflation (ex food and fuel) continues to rise however, nudging up from 2.1% to 2.2%, and keeps the heat on the Federal Reserve to move on rates this time next week. Market reaction to the print was relatively muted, overshadowed by the jailing of Trump’s former lawyer Michael Cohen and the ongoing case against Huawei CFO Meng Wanzhou on charges that the company is deliberately circumnavigating US sanctions on Iran. President Trump has suggested he could intervene on the latter if it would help to secure a trade deal with China, which got stock markets frothy again.

NZD/USD has dropped away overnight despite the uplift in stocks, perhaps a sign it may come under more near term pressure as we approach the Fed meeting and local GDP release next Thursday.

Conservatives show support for May

NZD/GBP reverses 1.5% as leadership confidence vote triggered

The Pound plummeted yesterday as 48 letters were lodged to the Conservative party chairman, triggering a vote of no confidence in Theresa May’s party leadership. But less than 24 hours later and a Reuters poll suggesting she has the support of at least 200 colleagues heading into the critical vote on her leadership tonight saw the Pound snap back, and NZD/GBP the worst performer overnight, falling around a cent. May has vowed to step down from the leadership in 2022 in return for support now, but we are wary of polls and even a narrow victory for her tonight could see her struggle to see 2018 out let alone last until 2022.

NZD/EUR also dropped by three quarters of a percent as Italy resubmitted a budget that brought them back to a 2.04% deficit target in 2019, a figure which the European Union is likely to ratify. NZD/EUR now appears to have put in a longer term top and may turn back below the key 0.60 handle in the coming days.

ECB meeting tonight

Will we get a 2019 rate hike in Europe?

Aside from the key vote on PM May’s leadership in the UK this morning we have the European Central Bank meeting tonight where their main refinancing rate is expected to remain unchanged at zero, but where the focus will be on the winding up of stimulus, and potentially a rate hike in 2019. Any green light on either can pressure NZD/EUR lower.

For Canadian Dollar buyers employment data is due out tonight, and there were signs yesterday this cross has put in a short term top after a stunning 10% rally in recent months. Positive employment data can see an exaggerated move lower in NZD/CAD as a result.

Deliver the Daily Currency Market Analysis to my Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots