New Zealand’s Rate
RBNZ raised rates by 50bps to 4.75% last Wednesday, matching expectations.
NZDUSD ended the week with -79 pips. Looking at the bigger picture, the pair is in a bearish market with the price trading below the descending trendline. 0.6500 proved to be a strong resistance standing in the way of the buyers as price reversed swiftly after a rejection from that area. After four consecutive weeks of decline, we can deduce that USD has been gaining against NZD and there currently is no signs of it slowing down.
FOMC Meeting Minutes
The minutes of the previous FOMC meeting were released last Wednesday and reflected a modestly hawkish tone. The minutes were largely in line with expectations, with a majority supporting a slowing pace of rate hikes by 25 basis points. However, a few FOMC participants advocated for a larger 50 basis points rate hike, which had already been mentioned by Fed Bullard and Fed Mester.
There was no discussion of a possible pause in rate hikes in the minutes, which could suggest a hawkish editing of the minutes after the meeting. This editing was likely to reaffirm the Fed’s commitment to lower inflation and higher rates.
Overall, the FOMC minutes did not contain any significant new information beyond what had already been communicated by Fed officials in recent weeks. However, the edits made after the meeting helped emphasize certain discussions and leaned towards a more hawkish view, understandable given the stronger economic activity and inflation data released since the meeting.
That explains the strength that the US dollar has been accumulating strength ever since the recent FOMC meeting. Let’s review EURUSD.
Notice the most recent price reversal near the latest swing high? (See circled) Market sentiment shifted swiftly after last FOMC meeting. It seems like the market is believing that the outlook for greenback is going to be stronger against its peers following the comments made by the Fed.
FOMC minutes last Thursday did not contribute much volatility to EURUSD as it is mostly what was expected. At the time of writing, the pair is continuing to make its way towards the next support near 1.0510.
Core PCE Price Index
The personal consumption expenditures (PCE) price index, a measure used by the Federal Reserve to monitor inflation, rose higher than expected in January. Excluding food and energy, the index rose by 0.6% for the month and was up by 4.7% from a year ago, higher than the expected readings of 0.5% and 4.4%, respectively. The core PCE gains were 0.4% and 4.6% in December. The increase in inflation suggests that the Fed will continue to raise interest rates, which has resulted in markets falling, with the Dow Jones Industrial Average down by around 500 points in morning trading.
Dow Jones 30 Daily
The US stock market continued to fall following the inflation data release on Friday. Dow Jones fell heavily as the market opening bell rang before it tap the 32550 support and recover slightly. Still, the index ended the day & the week in the red thanks to a hawkish FOMC minutes and the stronger than expected inflation data.
Financial Markets Analyst
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