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Market Update

EncoreFX’s daily market updates are written by our experienced and professional dealing team.

Fed Hikes Rates as Expected, Kiwi Lower ahead of GDP Numbers

Published December 20, 2018

The US Federal Reserve raised interest rates by 0.25% this morning as expected. The Kiwi Dollar has fallen on the back of this as the USD made gains across the board after the announcement. Some market participants had been pricing in the possibility of the Fed holding rates steady, so this morning’s hike has been dollar positive.

Fed Signals Fewer Rate Hikes

Dollar gains have been capped at this stage as the Fed signaled it now expects just two rate hikes in 2019, one less than it has previously forecast in September. For 2020, the FOMC said it still expects one further rate hike. As always, economic data will be a crucial indicator on the timing of future rate hikes and market attention now turns to Saturday morning’s US Q3 GDP number.

NZD awaits GDP Data

With the Kiwi losing around half a cent overnight, local attention now turns towards this morning’s NZ Q3 GDP data. Markets are expecting economic growth to have slowed to around 0.6% with annual growth to remain at 2.8%. The Kiwi had rallied yesterday after better than expected NZ consumer confidence data before falling sharply after the US Fed announcement. This morning’s data is due out at 10.45am.

Elsewhere

Across the ditch we have Australian Unemployment data due out this afternoon, with employment expected to remain solid. Further afield we have UK and Japanese Central Bank rate decisions, again with no major surprises expected.