The main FX price action in FX markets today has been a sharply weaker Kiwi Dollar, which has also fed through to a softer Australian Dollar.
The NZD/USD cross had not reacted much yesterday to much stronger than expected labour market data for Q2, including a fall in the unemployment rate to an 11 year low of just 3.9% and a chunky 2.2% yoy rise in wages, with markets eyeing up today’s RBNZ policy meeting. And indeed NZD/USD jumped nearly 3% after the Reserve Bank of New Zealand cut rates 50bp to a record low of 1.00%. Analysts had been unanimous that the RBNZ, the first of the developed central banks to cut rates back in May, would cut rates only 25bp. Moreover the RBNZ left the door wide open to further policy rate cuts and said that negative policy rates were possible albeit not probable.
Away from the Kiwi Dollar the Euro has been under modest pressure today following the release of very weak German industrial output data. Output in the Eurozone’s largest economy contracted 1.5% mom in June although this has typically been a volatile series. EUR/USD has edged lower back to 1.12.
