RBNZ on hold in spite of rate cut forecasts

Today's Highlights

• RBNZ on hold in spite of rate cut forecasts

• Chinese inflation still poor

• Soros is back in the game and very bearish

FX Market Overview

The President of the European Central Bank, Mario Draghi has pressed for tighter and more extensive Eurozone integration. In part of a speech which urged Eurozone members to do more to allow the ECB's bond buying and low interest rates to have a positive effect, he also set out a case for ever tighter monetary alignment between member states and that'll be viewed as another reason for Brexit by the 'leave' campaigners. Another ECB member, Benoit Coeuré says the central bank will be ready to stabilise the markets if the UK does vote to leave the EU. That's a bit of a leap into the dark but the sentiment is good. Sterling and the Euro have remained largely range bound for the time being.

We heard overnight that Chinese inflation was below forecasts and that has a negative impact on the currencies of the countries that supply China with its imports. However, the Reserve Bank of New Zealand managed to overshadow that - for the Australasian currencies at least - by ignoring calls for an interest rate cut and leaving their base rate on hold at 2.25%. Most analysts expected a cut to 2.0% but the RBNZ sees an improvement in the global outlook and decided not to act right now. I think we could all do with the same tint on the lenses of our glasses because the global economy looks as troubled as ever from my viewpoint and I see that the man who made a mint from the Pound's exit from the Euro's forerunner - the ERM, George Soros is trading again because he also sees trouble ahead. That George is always nicking my ideas.

Nonetheless, the NZ Dollar strengthened sharply on the news and it is the strongest it has been for a year this morning. It also dragged the Aussie Dollar with it. Against the Pound, we are down to A$1.94 and NZ$2.02 this morning.

Of course Sterling is still in the Jetstream of the Brexit hurricane and, whilst it is a bit tedious to be writing about it every day, it is fascinating to see all the politicos scrabbling around looking for an angle. Sterling got a little fillip this morning when the trade deficit was narrower than had been forecast but the range is still tight. It is as though traders are stunned in the headlights of the approaching referendum and can't see outside the current range. There is another televised debate on the referendum tonight, so prepare to be edified, enlightened and entertained ...or not as the case may be.

In other news, a teacher will have to rethink their question setting skills. Viewed all over the internet, the question he/she set was 'Come up with an equation that is true when X = 7. (Be creative, you can make the equation as simple or as complex as you want)'. One student, who may in fact be a genius, gave the answer X = 7. He or she is dead right and has actually given the most appropriate answer to a poorly worded question but the teacher's response was "Really". Yes really.