NZD underperforms as focus turns to the ECB

Key Movers

The USD dollar showed little net movement through trade on Wednesday as investors offered scant reaction to the first Harris/Trump US presidential debate. Snap polls taken in the aftermath seemed to conclusively declare Harris the winner of the debate, with polling odds tipping 5 points in Harris’s favour. Instead, attentions turned toward US CPI data, and while focus has shifted over recent weeks to place greater emphasis on labour market performance, the surprise uptick in price pressures helped lift US treasury yields to close higher on the day.

In other news, the yen trade was choppy after Bank of Japan board member, Junko Nakagawa suggested the current level of real rates is extremely low and monetary policy will need to be adjusted if expectations for inflation are realised. The comments supported expectations for tighter policy conditions and helps lift the yen and drive the USD toward 140.70 before US CPI numbers helped fuel a break back toward 142. The pound tested supports at 1.30 while the euro gave up 1.1050 to test 1.10.

Our attentions now turn to the European Central Bank policy meeting, where we expect rates will be cut by 25 basis points. We are keenly attuned to any commentary that may offer insight into the timing and trajectory of future rate adjustments. US jobless claims and PPI data, a key marker for the PCE deflator round out the macro docket.