The biggest market mover today might not be the FOMC statement at 1900 GMT but the Reserve Bank of New Zealand decision an hour later.
The OIS market is pricing in a 34% chance of a rate hike as inflation and growth soar.
If you want a sense of how strong the New Zealand is, the headlines in the New Zealand Herald tell the story:
Prospects best for seven years on back of labour, housing construction and manufacturing activity: economist
A recruitment firm says New Zealand businesses should take immediate steps to retain staff this year, with a survey suggesting that almost six out of 10 employees are seeking new roles….Unsurprisingly, better pay is the top reason for staff considering a move to a new job.
The economy is building up steam. Business confidence is soaring, consumers are ready to spend and the Canterbury rebuild will pressure inflation higher over 2014 and beyond
The Organisation for Economic Co-operation and Development expects New Zealand to grow by 3.3 per cent in 2014, one of the strongest among its developed countries, while English is forecasting a 3.6 per cent peak in March 2015. Unemployment is expected to ease from 6.2 per cent in 2013 to 5.8 per cent in 2014 and to 4.7 per cent by 2018.
The main argument I’m reading that the RBNZ won’t hike rates today is because in March Governor Wheeler will have a chance to spell out the reasons for the hike and forecasts and an accompanying press conference. That’s hardly a compelling reason and resilience of NZD even as its commodity cousins have faltered makes me believe plenty of traders are positioned for a hike.
