- US dollar tumbles across the board after FOMC meeting.
- NZD/USD hits highest since early February.
- Key event ahead: New Zealand GDP at 21:45 GMT.
The NZD/USD pair jumped, boosted by a sharp decline of the US dollar across the board and climbed from 0.6845 to 0.6915, the strongest level in almost two months. The move higher took place after the FOMC meeting. Now traders await Q4 GDP from New Zealand.
Dollar down, yields down and Wall Street up and then down
The greenback dropped sharply after the Fed’s meeting. The DXY hits the lowest in months but the greenback also lost ground against commodity and emerging market currencies. As expected, the Fed kept rates unchanged, and the overall meeting was seen as more dovish than market expectations. The “dot plot” signaled no rate hike for 2019 and one in 2020. The Fed also announced the end of the balance sheet normalization in September.
Over the last hour and after Powell’s press conference, the greenback stabilized and recovered a small portion of its losses. Wall Street initially reacted positively, but then equity prices dropped back into negative territory. US bond rose dramatically having one of the best days since May. The 10-year yield fell to 2.528%, the lowest since January 2018.
The NZD/USD peaked at 0.6916 but then pulled back under 0.6900 and as of writing was hovering around 0.6885, posting the fourth daily gain in-a-row. Attention now turns to growth data from New Zealand. Market consensus point to a 0.4% Q4 GDP growth (2.5% annual). “Today’s GDP data will be the key focus for setting the tone ahead of the RBNZ’s OCR review next week. At the time of the February MPS, the RBNZ expected a print of 0.8% q/q, and GDP is widely expected to undershoot this, with market expectations sitting at 0.5-0.6%. We expect a print of 0.6% q/q, with risks balanced on either side”, said ANZ analysts. Later during the Asian session, employment data from Australia is due.