Today's headlines: Fed Chairman’s softer stance | RBNZ approaching a rate cut | Soft Chinese inflation weakens JPY

Fed Chairman’s softer stance

The US Federal Reserve Chairman, Jerome Powell confirmed yesterday that the Fed is seeing a cooling labour market and he patted himself (and his team) on the back for bringing inflation under control. Many believe that signals earlier interest rate cuts, whereas, previously, no rate cuts had been expected in 2024. This volte-face hasn’t done much to weaken the US dollar but it has stopped it gaining strength. The GBP/USD rate is level at $1.28 and the EUR/USD rate is similarly levelling off at $1.0820. Chairman Powell will be speaking again today and, other than that and the crude oil inventories, we will have little else to focus on.

RBNZ approaching a rate cut

The Reserve Bank of New Zealand left their base rate on hold at 5.5% when they met in the early hours of this morning (UK?time). However, the accompanying statement was entitled, ?“Inflation Approaching Target Range”, and contained the belief that inflation would fall to within the bank’s target of 1%-3% in the 2nd half of the year. The markets took this to believe that we ought to see an interest rate cut, perhaps as soon as August. That caused New Zealand dollar weakness overnight, as evidenced by the GBP/NZD rate rising to test 2.10 and the NZDUSD rate dropping back below ?61 cents.

Soft Chinese inflation weakens JPY

Poor inflation data was released in China overnight. Annual Consumer Price Inflation slipped to 0.2% after a deflationary drop of 0.2% in June. Producer Price Inflation stayed in negative territory at minus 0.8%. That impacted other currencies in the Asian markets and caused the GBP/JPY rate to push up above JPY 206.00 again. The Japanese Yen hasn’t been this affordable since August 2008. Beware the?ever-present threat of the Bank of Japan intervening by buying Yen to support the currency.?

Today's Major Economic Releases

01:30 CNY Consumer Price Index (YoY)(Jun)?

02:00 NZD RBNZ Interest Rate Decision?

02:00 NZD RBNZ Monetary Policy Statement?

Interbank Exchange Rates