The wait is nearly over

March 10, 2016

The main surprise overnight was with the cut in rates from the New Zealand central bank, which cut rates by 0.25% to 2.25%. This was not widely anticipated, although their previous statements had indicated that they were ready to cut rates if warranted. The justification was the weakening in the global picture and they also mentioned the exchange rate, which they noted was 4% higher vs. December “and a decline would be appropriate given the weakness in export prices”. Only two of the seventeen economists surveyed by Bloomberg were anticipating a move, hence the sharp fall in the kiwi, with the RBNZ’s statement on the currency also adding to the downward pressure. This came after the Bank of Canada kept rates on hold yesterday, with a statement not as dovish as expected, leading to a further fall in USDCAD, down to levels last seen mid-November.

If that wasn’t enough central bank action for the week, then we have the much anticipated ECB meeting today. The run-up to this meeting, where further policy action is anticipated, has been very different to the last meeting where more easing was expected back in December. Rightly so, the market have moved away from the simple relationship that further easing (of whatever form) is bad for the currency. As the measures become more unconventional and bond yields ever lower, then it’s not surprising that the way the currency behaves is also changing. It’s not clear that negative interest rates have been effective either on the economy or in pushing the currency lower, which is one of secondary impacts that central banks are hoping for, even if not explicitly. Around 40% of the funds banks deposit at the ECB are remunerated at the negative rate. It could be that the ECB adjusts this to a tiered system, along the lines seen by the Bank of Japan back in January. There is also scope for them to extend the period and also increase the amount of month asset purchases from the current EUR 60bln per month. To go any further, they would likely have to expand the assets available for purchase under the scheme. The bottom line is that the ECB are clutching at fast disappearing straws in terms of finding effective ways to boost the Eurozone economy and reduce the risk of deflation.

Publication source
FxPro information  FxPro reviews

February 24, 2017
Oil prices slightly grew
Brent oil prices extended their recovery in the Asian session on Thursday. Buyers led the price higher and broke 56.50 dollars per barrel in the early European morning...
February 24, 2017
Dollar drifts on Fed's lack of optimism
FOMC February meeting minutes released on Wednesday failed to provide support for the bulls to manage a sustainable breakout above 101.50...
February 24, 2017
Can gold continue post Fed rally?
Gold jumped to a 3 month high today, snapping a 3-day losing streak today after traders digested yesterday’s minutes meeting from the US Federal Reserve...

Vantage FX Rating
Grand Capital Rating
OANDA Rating
Larson&Holz IT Ltd Rating
NPBFX Rating
Exness Rating

Empire Option Rating
365BinaryOption Rating
OptionBit Rating
TropicalTrade Rating
Beeoptions Rating
Anyoption Rating