Dollar extended gains after hawkish Fed which signaled another hike this year. Next week other policy makers including Yellen will speak and if most of them confirm the need of another hike before year end will definitely lift greenback to higher level. On the other hand, Sterling was hit by Theresa May’s Brexit speech last Fri. However, investors will probably focus more on BOE’s Gov Carney who will speak twice next week. If the hawkishness remains in tact, cable will recover previous losses and even attain new high. Australian dollar ended lower after S&P downgraded China and RBA Governor Lowe expressed reluctance to follow other central banks’ rate hike intentions. We see further weakening of AUD/USD to 0.7890 area in short term.
National Party of New Zealand won the election on Sat but failing to win an outright majority forcing Bill English to negotiate with small anti-immigration party in order to form the next government. With this unclear government, high volatility on Kiwi is expected in coming weeks. Furthermore, RBNZ policy meeting is scheduled to be held on Thu which is widely expected will maintain current interest rate. However, the central bank had expressed concerns about the strong currency previously and if the outlook remains cautious this round will trigger NZD selling off against other currencies. Thus, we expect NZD/USD will fall to 0.7260 and even 0.7190. Buy the dips on EUR/NZD and GBP/NZD after dovish RBNZ.
This week key economic events:
