The Dollar continues to trade in a very narrow range in trade-weighted terms but Sterling and the Kiwi Dollar are both down today.
Sterling has weakened 0.4% and to a 2-week low against the Dollar after Bank of England Governor Carney, speaking at an event on inflation targeting, said that if evidence builds that weakness in activity could persist there could be a relatively prompt response from the central bank. The Bank of England has kept its policy rate unchanged at 0.75% since August 2018, despite a number of major central banks having cut rates in the past 6-7 months. Before today’s speech markets were pricing in only a 30% chance of a 25bp rate cut by May and a 60% probability of a cut this year but this pricing has since inched up.
The Kiwi Dollar, which was more volatile than most developed currencies last year, has shed another 0.6% today to its weakest level since mid-December. There has been no particular trigger for this downmove but the unwinding of short Kiwi-Dollar positions seen in the first half of December has seemingly hit the buffers and gone into reverse.
