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NZD Edges Higher on Tame US Inflation and Patient Fed

Published April 11, 2019

The AUD is the best performing currency overnight as RBA Deputy Governor Guy Debelle’s comments yesterday were more neutral than the expected dovish tones. Debelle reiterated that while the economy seems to have slowed, the labour market was surprisingly strong and it would take time for that dichotomy to resolve itself. Markets have now pushed out expectations for a rate cut to October from the previous September rate cut priced in.

US Inflation

US consumer prices in the US rose 1.9% year-on-year, the highest increase in 14 months and slightly above market expectations of 1.8%. The underlying inflation trend remained benign against the backdrop of slowing domestic and global economic growth and reinforced expectations that the Fed will hold rates or potentially cut rates by the end of the year. The NZD edged higher amid tame inflation numbers.

Fed Meeting Minutes

Minutes of last month’s Federal Reserve meeting show they are unlikely to move on the existing interest rate range of 2.25-2.50% this year given risks to the American economy from a global slowdown, uncertainty on trade policies and muted inflation. Policymakers agreed to be “patient” about making any moves on rates.

Euro Dips on Dovish Draghi

The European Central Bank announced its latest policy decision this morning, with the main refinancing operations and the interest rates on marginal lending remaining unchanged at 0.00% and 0.20%. ECB President Mario Draghi confirmed policymakers were considering whether measures are needed to mitigate the impact on European banks of the central bank’s negative deposit rates. Optimism has faded that the central bank will announce imminent measures to help Europe’s lenders navigate negative interest rates.