RBNZ and US Fed rate decision

27 January, AtoZForex.com, Lagos – With the Federal Reserve Open Market Committee (FOMC) policy statement and rate decision due today, it will be a big market driver likely to shape the trend of the US dollar, which has been mixed recently.

The day has already started off with key data from Australia. The country’s consumer price index report showed a 0.4 per cent rise in the December quarter, following a rise of 0.5 per cent in the September quarter. According to the Australian Bureau of Statistics report, the most significant price rises were in tobacco (+7.4 per cent), domestic holiday travel and accommodation (+5.9 per cent) and international holiday travel and accommodation (+2.4 per cent). These rises were partially offset by falls in automotive fuel (–5.7 per cent), telecommunication equipment and services (–2.4 per cent) and fruit (–2.6 per cent).

In addition to the Fed rate decision today, we also have the Reserve Bank of New Zealand’s rate decision, hence, promising a volatile trading day in the currency markets.

Fed rate decision

Although it is unlikely that the rate will be changed, the statement will however be key as it would reflect the mindset of the Fed amid the China led recent global market concerns. Having raised rates from near decade lows in December, the Fed is expected to maintain interest rate at <0.50%. Today’s meeting will now be closely watched to see if the renewed China market rout will throw the Fed off its proposed course of a gradual hike in rates. With risk-off moves in global markets since the beginning of the year, sentiment has begun to look more dovish for the Fed. The near term direction of the dollar is likely to be seen after investors’ sentiment is shaped, following this policy meeting.

New Zealand Official Cash Rate

Last month, the Reserve bank of New Zealand (RBNZ) cut its interest rate from 2.75% to 2.5%, marking the fourth rate cut in 2015. As the economy softened last year, mainly due to below average economic growth and low inflation. The RBNZ is expected to leave rates unchanged this month.

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