NZD up after RBNZ announce interest rate hike

United States Dollar:

The MPC minutes yesterday showed that the Bank of England had voted to keep rates and QE unchanged earlier in the month. It didn’t come as a surprise. GBP/USD pushed higher away from 1.68, a reaction to the upgrade to Q1 2014 growth to 1.0% by the central bank, and to the Q2 number. There were, however, concerns on the board for the state of the UK’s current account deficit, which remains at 5.5% of GDP. This, in turn, stifled gains in GBP/USD, whilst there were also some worries among members for a softer inflation outlook. At the same time, UK public sector borrowing data was released, showing that the UK’s budget deficit in March narrowed to £4.9 billion vs. expectations for £8.9 billion – this supported bids in sterling. Come the afternoon, the USD strengthened and GBP/USD fell to a low of 1.6764, despite the release of weaker than expected US housing data. The data disclosed that new home sales fell in March to 384,000 vs. expectations for 455,000 – its lowest level in eight months. Cable has regained some ground overnight, though, and opens this morning at 1.6780. Markets will be looking to US durable goods data, released this afternoon, for more direction. ECB President Draghi is also due to appear on the wires.

We expect a range today in the GBP/USD rate of 1.6745 to 1.6840.

Euro:

The strong eurozone and German manufacturing and services PMIs released yesterday morning saw EUR/USD trade to a high of 1.3854, this after trading to a low of 1.38 earlier in the morning. The pair then drifted back towards 1.38 in the afternoon, as the dollar firmed up, while also acting on the back of comments from the ECB’s Ewald Nowotny who said he would not rule out QE and that an ECB rate cut could be a tool used by the central bank. While quite vague and general, the comments were hardly upbeat. The pair has been steady overnight, but has rallied on the back of stronger than expected German IFO Business Climate data this morning. The April index rose to 111.2 vs. expectations for 110.5, and EUR/USD has since spiked to 1.3842. In advance of a speech by ECB President Draghi, traders may be wary about bidding the single currency higher this morning.

We expect a range today in the GBP/EUR rate of 1.2100 to 1.2175.

Aussie and Kiwi Dollars:

In a widely expected move overnight, the RBNZ announced a 0.25% rate hike. NZD/USD bounced from .8575 to .8620 on the news and went on to trade to a high of .8635, as the accompanying statement sounded a fairly hawkish note, saying that inflation pressures were increasing and that further rate rises would be dependent on future data. The kiwi has settled back lower since, though, and opens the London session at .8595. AUD/USD has been steady by comparison and trades at .9275 this morning, still on the back foot after the weak inflation data released earlier in the week.

We expect a range today in the GBP/AUD rate of 1.8065 to 1.8180.

We expect a range today in the GBP/NZD rate of 1.9500 to 1.9610.

Data releases for the next 24 hours:

AUD: No data

EUR: ECB President Draghi Speaks

GBP: CBI Realized Sales

NZD: No data

USD: Core Durable Goods Orders m/m, Unemployment Claims