Daily Forex Market Report 23-Nov-2022: NZD gains 0.5% on JPY

USD softens further whilst GBP awaits PMI survey data

The New Zealand dollar is the mover and shaker this morning after its central bank hiked rates, leading to gains above 0.5% against the Japanese yen, US and Canadian dollars and Swiss franc.

Policymakers at the Reserve Bank of New Zealand earlier today raised rates by 75 basis points, pretty much as predicted, taking its cumulative hikes to four full percentage points since October last year, and squawked hawkishly.

Policymakers signalled they may take rates to 5.5% and that the economy will enter a recession, with a bigger contraction of the housing market than previously expected.

USD

The US dollar meanwhile continued to soften against the euro, while sterling and the yen both took a breather.

On Wednesday morning, cable was up less than 0.05% at 1.1885, EURUSD was up 0.3% at 1.0333 and USDJPY up less than 0.05% at 141.20.

Traders thoughts are still fixated on what the next few moves will be in the global tightening of interest rates and other monetary policy, while many analysts cited China’s Covid, regulatory and foreign policies as other important factors in general market sentiment.

Elsewhere today, the dollar will be in focus as eyes turn to minutes from the latest Federal Reserve policy meeting, seen as the week’s big risk event before the Thanksgiving holiday break tomorrow.

With the last FOMC meeting seeing policymakers ready to break their streak of 75bps hikes with a step down to a 50bps hike in December, traders will scrutinise the minutes for terms relating to this, the “higher for longer” plan and comments about inflation’s stickiness.

Fed chair Jerome Powell also linked the stepdown in rate hikes to a potentially higher terminal or peak interest rate, so people will also be looking for any indication that the rest of the committee agrees and how much higher the terminal rate may need to go.

GBP

For Sterling, there could be some movement from the flash PMI survey data released today.

The market is looking for a further deterioration in both the manufacturing PMI and composite gauge, possibly due to the prospect of austerity measures by new PM Rishi Sunak and chancellor Jeremy Hunt.

The Chancellor will also be testifying later before the Treasury Committee about last week's fiscal statement.

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