Global Themes

NZDUSD steadies as Fed stays on track

The NZDUSD regained some of its losses overnight as the keenly anticipated announcement from the US Federal Reserve indicated the US central bank remains on track to raise US interest rates.

There were few changes to the Fed’s statement although it did make reference to improving sentiment and ongoing improvement in the US labour market.

The Fed also signalled it is comfortable with the much expanded size of its balance sheet. Some analysts have indicated that a move to reduce the size of the Fed’s balance sheet could be one way of tightening policy with less impact on US interest rates or the greenback.

What wasn’t mentioned? The Fed made no mention of the recently strengthening US dollar and made no change to its inflation forecasts. The Fed continues to believe inflation will return to its 2% target over the “medium term”.

Job losses

Earlier, the NZD had been weaker after yesterday’s quarterly employment report saw the unemployment rate rise to 5.2% from 4.8%.

The NZDUSD ended yesterday’s session down 0.4%.

In other markets, the NZD was mostly lower, hit by the jobs news.

The NZD fell 0.2% versus the euro and dropped 1.1% against the British pound.

The NZDAUD lost 0.3% as it fell from four-month highs.

UK inflation eyed

Today’s major data comes from Australia with trade balance and building approvals due at 1.30pm.

Tonight, the focus is on Europe. Most notably, we have a key UK inflation report.

While the political impact of Brexit has been massive, the economic impact has been muted. In fact, the economy has picked up steam. Further positive news could see the GBP stronger.

For more on February's upcoming events, please download out latest Risk Events Calendar.

By Steven Dooley -- Currency Strategist APAC

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