RBNZ hikes rates and Fed minutes move into focus

NZD/USD -> The kiwi rises above 0.6350

Tencent -> The stock trades around its 2022 low

EUR/GBP -> The pair falls to 0.84

NZD/USD rises post-RBNZ, ahead of Fed minutes

NZD/USD dropped 0.3% on Tuesday ahead of the RBNZ’s interest rate decision and despite a mildly weaker USD. The market digested mixed data from the US as industrial production was stronger than forecast in July. However, housing starts plummeted by just shy of 10% as rising prices and surging mortgage costs cool the housing market. Overnight the RBA raised interest rates by 0.5% as expected, taking the OCR to 3%.

The central bank’s statement revealed that a steeper path to tightening was needed, although Orr ruled out a 75 basis point hike and warned over growth. Looking ahead US retail sales are expected to slow considerably and the minutes to the July Fed meeting could shed some light on whether the Fed will hike rates by 50 basis points or more in September. A less hawkish Fed could pull the USD lower.

US retail sales MoM July                Expected: 0.1% (0.9%)                Previous: 1%

Where next for NZD/USD?

NZD/USD is extended the rebound from 0.61 the 2022 low. The price has risen over the 50 sma which combined with the bullish RSI keeps buyers hopeful of further upside. However, the pair ran into resistance at the 100 sma. A break above here at 0.6430 is needed to test 0.6485 last week’s high and extend the bullish run to 0.6585.

Failure to retake the 100 sma could see the pair fall to 0.6250 the confluence of the 50 sma and the multi-week rising trendline. A break below here brings 0.6190 to play the mid-June low.

Tencent Q2 earnings preview

Tencent is due to report Q2 revenue of 132.2 billion yuan ($19.5 billion). This would mark a 4% annual decline – the first year-on-year fall in sales ever for the Chinese conglomerate.

Meanwhile, net income is expected to fall almost 30% to 23.8 billion yuan. The downbeat figures come as the Chinese economy slows on the back of the strict zero-COVID policy and amid ongoing challenges in the domestic gaming market. Gaming and advertising are key revenue streams for Tencent and they are two areas that are expected to have been hit in Q2.

EUR/GBP looks to UK inflation data

EUR/GBP fell 0.2% in the previous session after mixed YK jobs data and as economic morale continued to collapse in Germany.

UK unemployment held steady and redundancies low. However, job vacancies fell by 19,200 in the three months to July and real wages fell by the most on record. Today the pair is falling further as attention turns to UK inflation data which is forecast to climb again. The BoE forecast that inflation will rise to 13% over the coming months.

Hot inflation could fuel bets that the BoE will raise interest rates by 0.5% again in September after raising rates by 0.5% in July. Separately, eurozone Q2 GDP data will also be in focus. This is the second reading and is expected to confirm the initial reading.

UK CPI July               Expected: 9.8% (0.5%)               Previous: 9.4%

Support can be found at 0.8340 (August low) and 0.83 (round number).

Resistance for the index can be seen at 0.8430 (20 sma) and 0.8490 (August high).

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