NZD weaker on dovish RBNZ comments

Today's Highlights

BOE unanimous but expressed some concerns

NZD weaker on dovish RBNZ comments

UK retail sales awaited

FX Market Overview

The Commonwealth Games have begun with more tartan than a shortcake box and a fiddly torch clasp as well. Good luck to all the competitors and officials. Especially good luck to Sir Bradley Wiggins, who missed out on the Tour de France but could make some significant impact in Scotland.

The minutes from the last Bank of England meeting showed the committee voted unanimously to keep the base rate and the QE budget on hold. That was the expected result but some concern was expressed over how low the unemployment rate can get before we reach full capacity and about the amount of slack there is in the UK economy. The quarterly inflation report, due for release in August will be scrutinised for evidence of both factors and many analysts are starting to factor in an interest rate rise around the turn of the year. Personally I think the lack of core growth would suggest the rate rises will be later than that but it is all speculation at this stage.

The Reserve Bank of New Zealand raised interest rates by 25 basis points for the 4th time in a row last night. That would normally strengthen the Kiwi Dollar but their suggestion that they would now pause in their rate hiking cycle has had entirely the opposite effect. The Sterling - NZ Dollar rate bounced up to 1.98 but this looks like a knee jerk reaction so NZD buyers may want to take advantage of this windfall before international investors come to their senses and realise that, at 3.5%, the NZ interest rate is a fantastic investment opportunity for those who can borrow at virtually 0.0% elsewhere. And there is a pretty strong chance the RBNZ will hike again before the year end anyway.

A sharp upturn in Chinese factory activity has boosted the Australian Dollar overnight. China is Australia's number one export market after all. The Kiwi Dollar would have followed suit were it not for the RBNZ.

Mixed data from Italy this morning has weighed on the Euro a little. The retail sales data was quite poor and that is not good news for recovery hopes. There is very little else from Europe today so

Today's interesting data for the Pound is the June retail Sales report. Growth of around 4% is expected but yesterday's CBI report was very strong and that would suggest we may get a better number today. The Pound has room to strengthen.

This afternoon's US housing market data is pretty well all we have to consider after lunch although my suggestion of operating from a pub garden for the afternoon has been rejected.

I'll leave you with an 'out of office' messages which made me laugh. It read;

'I'm out of the office right now. If you have immediate questions, please contact XXXXXXXXXXX. If your question is not immediate, you may want to ask yourself why you took time out of your day to email me.'