We
had some data from Japan today: Reuters Tankan, April trade data,
March machine orders data. None of it moved the yen too much.
We
also had comments from Fed officials, Federal Reserve Bank of
Cleveland President Loretta Mester and Federal Reserve Bank of Boston
President Susan Collins. Both emphasised that rates would be held
restrictive for longer, in line with pretty much everything we’ve
been hearing from the Fed.
The
main event for the session, though, was the Reserve Bank of New
Zealand Monetary Policy Statement, followed an hour later by the
Bank’s media conference.
The
Statement was read as quite hawkish. While the Official Cash Rate
(OCR) was left unchanged at 5.5%, the ‘path’ for rates ahead was
raised by the Bank, implying later rate cuts. The peak the Bank
projected was 5.61% (up ever so slightly from 5.6%) in September
this year. The Statement and Minutes emphasised that policy needs to
be remain restrictive until inflation falls further:
- “Annual
consumer price inflation remains above the Committee’s 1 to 3 percent
target band, and components of domestic services inflation persist.
The Committee agreed that monetary policy needs to remain restrictive
to ensure inflation returns to target within a reasonable timeframe.”
The
Statement and Minutes noted developments pointing to inflation
continuing to fall:
- “the
Committee is confident that maintaining the OCR at a restrictive
level for a sustained period will return consumer price inflation to
within the 1 to 3 percent target range this calendar year.”
The
Bank signalled it won’t be cutting the OCR until Q3
of 2025.
NZD/USD
was marked higher on the Statement, topping out just over 0.6150.
The
media conference that followed had Governor Orr not sounding as
hawkish as the statement. NZD/USD drifted back down and is circa
0.6120 as I post.
The
jump higher for NZD/USD dragged AUD up, not to the same extent. In
local Australian news Avian Influenza has been found on a farm, the
first case in Australia. It won’t be the last.
Major
FX elsewhere was more subdued as traders await the Federal Open
Market Committee (FOMC) May meeting minutes later today.