NZ interest rate cuts unlikely

Today's Highlights

• NZ interest rate cuts unlikely

• Lack of movement on production cuts keeps oil weak

• Service sector indices rule to roost on Wednesday

FX Market Overview

Everyone is expressing their views on the range of changes David Cameron believes he has negotiated with Europe but there are loads of hurdles to overcome before these changes can be ratified. The UK public can also vote on whether these make a blind bit of difference to their attitude towards EU bureaucrats.

Sterling had a better day despite of the EU exit talks and in spite of a poor construction PMI index. Perhaps the news that the Prime Minister is planning to campaign for continued EU membership is part of that but the news that the snappily titled, National Institute of Economic and Social Research kept its 2016 GDP forecast on hold and raised the forecast for 2017 has helped. Today's Service Sector PMI is the key to the Pound's performance over the next 24 hours and we get that at 9.30 GMT. The forecast is for a minor downward tick.  

This morning also brings the Service Sector PMI for the Eurozone as well as retail sales for the currency sharing bloc. Both sets of data are expected to be marginally better than the last month, so the Euro has a chance of further strength in the day ahead.

The New Zealand Dollar gained 3 cents against the Pound in early trade after the Reserve Bank of New Zealand Governor; Graeme Wheeler said that low inflation doesn't automatically mean the RBNZ should cut interest rates. Many in the markets were starting to factor in a new base rate cut for the RBNZ, so this comment was bound to strengthen the NZD.

This afternoon brings the Service Sector index from the US Institute for Supply Managers. A small drop in the index is expected and that may well help to weaken the USD a tad. However, the low oil, commodity prices and the weakness in other economies are likely to combine to keep a fair amount of strength in the USD. So volatile but directionless is the best description for the Dollar's likely path today.

It'll be a busy Wednesday. Have a great one.    

Three gifts 

Three brothers catch up at a family gathering. All have done well for themselves and each has given their mother a gift for her birthday.

John says, "I had a beautiful house built for her with four bedrooms and a pool. We'll be moving her in next week.  

Mark says, "I bought her a Mercedes S class and hired a driver to take her anywhere she wants. He's bringing the car this afternoon."

Peter says, "I think I found her the perfect present. She loved to read the bible but her eyesight isn't getting any better, so I bought her this rare trained parrot who can read. He's a big handsome thing and he can sit with her and read tracts from the Bible whenever she wants."

The gifts were given and a few weeks later each of the brothers received a letter from their mum thanking them for their gifts.

Dear John. Thank you for my new house although it is so huge that I will only live in the breakfast/dining room and sleep in the small bedroom because that master bedroom is massive. I don't swim these days so the pool will be emptied but thank you for the gift anyway."

Dear Mark. Thank you for the lovely car although I really don't get out much now so the chauffer is very bored and actually quite rude to me. But thank you for the thought."  

My Dearest Peter, I knew you would know just what your mother really wanted for her birthday. You knew I didn't need flash cars and mansions at my time of life. That chicken took some plucking but it was delicious."