EURUSD bounces as market goes risk-on
The euro rallies over increased risk appetite post US-inflation data. After a six-month long rally against the euro, the dollar does need some breathing room and a cooling CPI might just have done the trick. The ECB has lifted rates at its fastest pace on record, but as the eurozone is in a much more vulnerable position than the US in terms of financial stability, doves have raised voices for a less aggressive stance. Looking forward, the difference between a cautious ECB and an assertive Fed as reflected in their rate spread would continue to drive the exchange rate. The pair is about to test 1.0600 with parity (1.0000) as the closest support.
NZDUSD recovers over hawkish RBNZ
The New Zealand dollar rallies as the RBNZ may deliver a large-sized rate increase. According to the central bank’s latest survey, the country’s near-term inflation rate is expected to ease next year but will remain stubbornly high. Bringing the housing market to a soft landing would be policymakers’ top priority as a decline of wealth tied up in the housing market would sap consumers’ confidence and put a lid on spending. As the RBNZ may accelerate the tightening with a 75bp hike, hopes of dovishness on the US dollar side would raise demand for the kiwi. The pair is heading towards 0.6460 with 0.6000 as a fresh support.
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