Despite the Fed’s rate hike, the steady rate outlook amongst the FOMC member and the plans to start decreasing the Fed’s balance sheet, the dollar fell Friday. All the disappointing data and shaky US politics are starting to negatively affect the US currency.
On Friday, US homebuilding didn’t match the estimates for the 4thВВ consecutive month, while the University of Michigan consumer sentiment survey demonstrated a continuing decline in sentiment from the immediate highs of the post-election.
Once again, NZD was the biggest gainer in the market, with most gains taking place on Friday and continued gaining on Monday after the Westpac consumer confidence index for 2Q and a service industry PMI both had a sharp raise. This raise wasn’t predicted by economists; the rise in the service sector PMI comes after another similar rise in the manufacturing PMI on Friday.
Investors could be thinking that these positive reports could contradict the poor Q1 GDP figure for New Zealand and prevent the Reserve Bank of New Zealand (RBNZ) from taking a more dovish stance when it meets later this week. Going into the meeting, kiwi could be a buy but it is forecast to fall afterwards as the RBNZ keeps their policies untouched.
Fundamental Analysis-ВВ Euro Rises as Gold Slips for Fourth Day
Even though there aren’t many major indicators during the day in Europe, investors are expected to focus on the start of the long-awaited Brexit negotiations between the EU and the UK. Today’s first meeting. This first meeting is expected to focus on the structure of the talks rather on the problems themselves. The European Union proposed a series of 4 week negotiating cycles for each round of talks; for example, 2 weeks to work on the negotiating positions, 1 week for any bilateral talks, and 1 week for feedback and comments or even more talks at a more political level. Even though the two sides haven’t agreed yet, it is expected that Britain will agree on this.
Philip Hammond, the UK Chancellor of the Exchequer, said the Brexit notification letter that Prime Minister May sent in March would be the foundation of the Brexit negotiations. This means that the starting point would call for a “hard Brexit”, a very negative result for GBP.
It is expected that nothing market-moving will come across the first day but it could be an indicator of the tone of the negotiations- will the negotiations be cooperative, friendly, antagonistic or hostile?
There will also be an EU summit on Thursday and Friday where Michel Barnier, the EU’s chief negotiator, will brief leaders on the results of the talks.
On a final note, later on today, William Dudley, New York Fed President will hold a business roundtable. As he is a very respected person on the FOMC, the market will be very interested to hear his views and comments on a possible market fall-out.