Yesterday’s Fed news is today’s Fish and Chip paper. The New Zealand Dollar (NZD) recovered off the 11 month lows to pop up to 0.6560. Equity markets recovered losses and the Fed continued their tightening of policy. The Federal Reserve raised their cash rate by 50 points to 1.0%; Jerome Powell said they would most likely do it again at the June meeting. Raising too fast could cause a recession – something Powell said he was actively considering. Tightening slowly should bring about a soft landing in theory. Powell said the economy remained strong and that households and businesses look to be in good shape. Plans to shrink the 9T asset position will take place next month in efforts to bring down inflation which is running at a 4 decade high. Analysts are predicting the Fed to raise rates to around 3.25% by the end of 2023. Last night’s risk off slump had bonds exploding, the US 10 year bond surged to 3.06% hitting the highest level since 2018 and taking the kiwi back to a new low of 0.6390. The heavy week of economic data is not over yet with US Non-Farm Payroll releasing in the morning adding further volatility. The overall NZD tone generally points to a lower bias all things considered.
The current interbank midrate is: NZDUSD 0.6425
The interbank range this week has been: NZDUSD 0.6392- 0.6566