RBNZ on hold but June rate cut is still possibility

Today's Highlights

• RBNZ on hold but June rate cut is still possibility

• Federal Reserve on hold and tone is dovish

• US GDP decline forecast

FX Market Overview

As mentioned in yesterday's late report, the UK economic growth data wasn't as bad as expected and, in real terms, it is much better than many countries around the globe. Hence, Sterling rallied a little on the news but the Pound is struggling to break above EUR 1.29 and USD 1.46 and has been stalled at that crossroads for a couple of days.

The US Federal Reserve did as was expected and left the US base rate on hold when they met late yesterday. They remain dovish and bets on early interest rate hikes were unwound after the statements “economic activity appears to have slowed” and “growth in household spending has moderated” appeared in the statement that accompanied the announcement. With US GDP data due this afternoon, traders were understandably muted in their response to the Fed but this data is expected to be quite poor. A slowdown in the rate of US economic activity is perhaps inevitable but the pace of that decline is the key to the US Dollar's activity in later trade. The GBPUSD rate is bumping its head on $1.46, so a break to higher levels would be very significant but, if the data is at the 0.5% quarterly growth rate that has been forecast, I suspect the Pound will be pushed back down to the $1.43 level.

Another central bank was in the news last night. The Reserve Bank of New Zealand didn't trouble the bookies. They left the base rate on hold and the NZ Dollar strengthened a little on that news because the only alternative was a possible interest rate cut. The RBNZ put that idea off for now but didn't discount it completely and a June rate cut is still a possibility.

This morning will start with German inflation data and that is expected to be as flat as a very flat thing with a puncture. In fact, more likely is a slightly deflationary number but it won't have any kind of impact because none in the western economies are experiencing significant inflation. The Eurozone inflation data tomorrow should confirm that with similarly dead numbers.

And that is about all I have to say about today and I hope you are impressed that I managed to cover it all without mentioning the word Brexit...Doh!