Tuesday, April 26, 2016

Forex Market Waits For Fed, BoJ

Not much going on in currency world

There is precious little going on in currency markets at the moment with a lot of risk focused on Wednesday, Thursday and Friday's data releases. The importance and lack of clear belief around what the and the will announce on Wednesday night and Thursday morning respectively has led traders to once again put their hands in their pockets and let the dice fall where they may. This is of course wise but lends me little to comment upon.

Mood music > polling so far

continues to drag itself out of the referendum mire as more and more people believe that the interjection of President Obama will have had a lasting effect on polling in favour of the Remain camp. I am yet to see poll results that will have been influenced by the last week's Treasury report or the visit of President Obama but the mood music in currency markets and anecdotally in Westminster has shifted.

In the meantime, let's enjoy the recovery while it lasts while realising that positive movements for the pound now will limit the beneficial snapback in the weeks following a vote to remain unless UK data starts to really improve.

Antipodeans diverging for now

Following a day off yesterday NZD has run higher ahead of the Reserve Bank of New Zealand policy announcement tomorrow night. There is a 40% chance of a cut priced in to markets for this month's meeting and there are arguments for a stronger kiwi regardless of what happens; no cut is obviously a positive and even a cut to 2% still gives the NZD a decent yield premium to other currencies out there.

If you were buying for yield at 2.25% there is very little reason why you wouldn't be doing exactly the same with rates at 2%.

Its antipodean cousin is lower this morning however as investors sold the AUD ahead of tomorrow's inflation report.

The Day Ahead

Some interest today will be piqued by the announcement of the latest number due at 3pm UK time. There is a decent chance that April's reading is lower than March's based on increased fuel prices and a slowing of wage gains.



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