Yesterday and overnight the 3 central banks, Fed, RBNZ and BOJ, made their monetary policy decisions for the respective Countries, but nothing has changed and interest rates remain the same.
Starting from the Fed, there was no surprise in the markets with interest rates unchanged in the 0,25-0,50% range in line with expectations, and with an unanimous vote for the non-move. The statement, however, was pretty bearish and some doubts spread between investors on the real willingness by the Fed to continue the interest rate normalization.
Despite this a rate hike in June is not totally excluded.
Very similar situation in New Zealand, with the RBNZ which left unchanged the interest rate at 2,25% against market expectations, but the spokesman statement suggest that a possible easing is on the book for June in order to bring inflation in line with the Banks comfortable level:
“further policy easing may be required to ensure that future average inflation settles near the middle of the target range”
Other elements in favor of this short term easing would be, following the RBNZ, the deteriorate economic expectations, mostly for the Chinese market, but also for all the others financial markets globally; an inflation level still too low, capped by lower oil prices and other lower import prices; and the NZD exchange rate which continue to be too high, considering the Country’s export prices pretty low.
Last one is Japan, with the BOJ that decided not to change the -0,10% interest rate level, disappointing the market operators, who were waiting for a strong intervention from the Central Bank. Despite spokesman declared the possibility of an intervention in case of necessity on the 3 fundamental variables (quantity, quality and interest rate), the market reacted strongly bringing up Yen price.
On one hand EUR/USD, after a small spike this morning, at the time of writing is trading almost flat +0,17%, on the other hand NZD/USD and USD/JPY reacted strongly, trading respectively at +1,47 (at 0,6934) and -2,21% (at the moment at 108,9825) and hinting that the Central Banks moves took by surprise investors, which thought to see a different scenario.
Passed this storm and after the market will have assimilated the non-moves we will see the real price action of the crosses for today’s training session which probably, won’t reverse the actual trend.