The much anticipated FOMC meeting last night turned out to be a rather underwhelming event for investors, as the official unveiling of Operation Twist failed to inspire. The Fed revealed their intention to buy $400bn of long term debt, funding the strategy by simultaneously selling $400bn in short-term securities; however investors were clearly positioned for something more dramatic, and in turn equities took a dive into deeply negative territory. One factor which may have unsettled markets was the clear divide amongst Fed policymakers in coming to this solution. In total, three members (Fisher, Plosser and Kocherlakota) voted against the plan, a fact which has mild echoes of the fractured, lack of unity plaguing European policy decisions lately.
The negative sentiment has carried over into Asian trading, with most equity indices in the region posting significant losses today. The Nikkei is trading -2.1%, Hang Seng -4.2% and Shanghai Composite -2.0%, while EURUSD has slumped to lows of 1.3528, and USDJPY has come within 30-40 pips off its all-time lows.
In terms of data overnight, NZ Q2 GDP came in at a much lower than expected +0.1% QoQ, +1.5% YoY compared to estimates looking for +0.5% QoQ, +1.7% YoY. NZDUSD is certainly underperforming the rest of the majors in the aftermath (low this morning 0.7940), but we believe this weak print had already been factored into the RBNZ’s policy stance, and doubt that it is sufficiently poor data to suggest another rate cut is on the horizon. If anything, the largest influence on NZ’s future interest rate path at present is the ongoing turmoil in Europe; until we see a reduction in the massive levels of uncertainty posed by the Eurozone crisis, it is doubtful the RBNZ will act.
Coming up in today’s session, we will get a batch of PMI data out of Europe, along with Canadian retail sales, and US jobless claims figures.
By
M.Zohaib Gadit
Forex Trading Consultant
The negative sentiment has carried over into Asian trading, with most equity indices in the region posting significant losses today. The Nikkei is trading -2.1%, Hang Seng -4.2% and Shanghai Composite -2.0%, while EURUSD has slumped to lows of 1.3528, and USDJPY has come within 30-40 pips off its all-time lows.
In terms of data overnight, NZ Q2 GDP came in at a much lower than expected +0.1% QoQ, +1.5% YoY compared to estimates looking for +0.5% QoQ, +1.7% YoY. NZDUSD is certainly underperforming the rest of the majors in the aftermath (low this morning 0.7940), but we believe this weak print had already been factored into the RBNZ’s policy stance, and doubt that it is sufficiently poor data to suggest another rate cut is on the horizon. If anything, the largest influence on NZ’s future interest rate path at present is the ongoing turmoil in Europe; until we see a reduction in the massive levels of uncertainty posed by the Eurozone crisis, it is doubtful the RBNZ will act.
Coming up in today’s session, we will get a batch of PMI data out of Europe, along with Canadian retail sales, and US jobless claims figures.
By
M.Zohaib Gadit
Forex Trading Consultant
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