A fairly quiet start to the week for currency markets with the NZ Dollar consolidating its recent gains and moving slightly higher on all major cross rates. Most currencies traded narrow ranges ahead of a big week of news that includes US mid-term elections, and policy meetings in the U.S, Australia, and New Zealand.
Markets have been consolidating ahead of todays elections in the U.S, with the possibility of a split congress where Democrats gain control of the House while Republicans retain the Senate. Several major polls are indicating a 7 point advantage (50% to 43%) with registered voters preferring Democrat candidates over Republicans for the house.
Economic data released overnight had little impact on the USD, with US ISM reporting a smaller than expected slowdown in service sector activity. The report showed the index falling to 60.3 after a record high of 61.6 in September, but better than market expectations of a pull back to 59.3.
The RBA is expected to the keep the OCR unchanged at 1.5% this afternoon. Of more interest will be the accompanying statement and the RBA’s reaction to the recent sharp fall in unemployment to 5%. Markets will be looking for clues as to whether this has had any material impact on the Bank’s outlook for inflation and policy.
On the local front we have GDT Dairy Auctions tonight, unemployment data tomorrow, and the RBNZ statement on Thursday. But prior to this, all eyes will be on the US mid-term elections and the impact this has on financial markets.
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