Today’s Notable Sentiment ShiftsUSD – The dollar slipped to a one-week low against a basket of currencies on Monday, from the two-decade high hit last week, as traders pared bets on how aggressive the Federal Reserve would be in raising rates at its meeting later this month.
NZD – New Zealand CPI jumped 1.7% in the second quarter, lifting annual inflation to a 32-year high of 7.3% and resulting in some analysts calling for more aggressive policy tightening from the RBNZ.
Commenting on the report, Goldman Sachs noted that: “Today’s upside surprise clearly raises the risk that the RBNZ step up the pace of tightening at its August meeting – we see a 35% chance of a 75bp hike. However, with rates already at a modestly restrictive level of 2.5%, we think the bar for the RBNZ to accelerate the pace of tightening at this point in the cycle is relatively high – and will likely require clearer signs of a breakout in long-term inflation expectations rather than high spot inflation.”
