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On January 29th, Goldman Sachs analyst Kay Hay stated that given strong economic data and signs of stabilization in the labor market, the Federal Reserve is likely to maintain its current policy for the time being. However, we expect interest rate cuts to resume later this year, as the slowdown in inflation will allow the Fed to implement two more "normalization" rate cuts, bringing interest rates back to what the Federal Open Market Committee members consider a neutral level.January 29th - Former Federal Reserve Vice Chairman Richard Clarida stated that he expects Powell to avoid the topic of the dollar during todays question-and-answer session. He said, "The Fed is trying to avoid any and all discussion about exchange rates."Federal Reserve Chairman Jerome Powell will hold a monetary policy press conference in ten minutes.January 29th - The market can pay attention to a slightly technical detail: while the entire Federal Open Market Committee (FOMC) votes on the benchmark federal funds rate, only the seven members of the Federal Reserve Board vote on the interest rate on outstanding reserves (IORB). This rate typically moves in tandem with the federal funds rate. Today, all seven board members voted to keep the rate unchanged, which is usually the norm, even if some board members dissent on the federal funds rate decision. However, there were previous concerns that board members eager to push for rate cuts might express this inclination in the IORB vote. But this did not happen today.On January 29th, Pepperston analyst Michael Brown stated that the policy statement was largely unchanged, although the assessment of economic conditions was revised upward to reflect a "robust" pace of growth. He indicated that attention will shift to the press conference, where Federal Reserve Chairman Powell may mention that the current federal funds rate is within a reasonable range for the neutral rate, but he will likely firmly avoid any questions regarding what happens after May.

NZD/USD falls rapidly from 0.6260 when the RBNZ announces a decline in inflation projections to 3.07 percent

Daniel Rogers

Aug 08, 2022 12:00

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The NZD/USD pair has encountered selling pressure while attempting to surpass the immediate resistance level of 0.6260. The asset has seen bids after the Reserve Bank of New Zealand (RBNZ) announced inflation estimates at 3.07 percent, down from 3.29 percent previously. It could be an indication of waning price pressure, but additional evidence is still needed to support the argument.

 

Price pressures in the New Zealand economy are increasing and have not yet shown signs of weariness. A June report indicates that an inflation rate of 7.3% is adequate to generate headwinds for families. The RBNZ is consistently escalating its policy tightening measures to combat the same. RBNZ Governor Adrian Orr has already increased the Official Cash Rate by 2.50 percentage points.

 

On the front of the US dollar, the US dollar index (DXY) has returned all intraday gains and is currently trading near the day's open at 106.60. While attempting to break over the crucial resistance level of 106.80, the DXY has encountered selling pressure. This week, investors' attention is centered on Wednesday's release of the US Consumer Price Index (CPI).

 

The annual inflation rate is projected to continue at 8.7 percent, down from 9.1 percent in the previous report. Oil prices have been on a downward trend in July, which may be the determining factor for a significant decline in the price increase index. While the US CPI excluding volatile food and oil prices may increase from 5.9 percent to 6.1 percent, the previous reading was 5.9 percent.

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