The Commodity Currencies are stronger today as the market shifts back to risk seeking mode. Gold and oil prices are higher after the release of softer gasoline inventories and this has pushed the Canadian dollar to a 7 month high against the US dollar.
To the surprise of the market, New Zealand raised interest rates again to 7.75 percent. Even though the market was looking for a rate hike, they did not expect one until June since the RBNZ just raised rates last month. However despite a 10.8 percent surge in the kiwis value against the US dollar and a 13 percent surge against the Yen since the last rate decision, the central bank felt that domestic demand and the housing market was so robust that they needed to tighten the economy once again. There was no mention of further rate hikes in the accompanying text, which suggests that the RBNZ will pause. In other words, they wanted to just deliver two back to back rate hikes and be done with it. The potential end of the tightening cycle explains the NZD/USDs sharp reversal. Looking ahead, New Zealand still has the trade balance due for release. Canada will be releasing their average earnings and their monetary policy report tomorrow. The central bank already hinted that they are slightly hawkish, so there should be no surprises in the report.