The US dollar is consolidating in narrow trading against most of the major currencies as participants digest several developments ahead of what was expected to be the highlight today, the BOE meeting and US April CPI. The greenback's consolidation is giving it a heavier bias against most of the major currencies. The recently strong upside momentum has stalled, but the losses are modest and the euro and sterling are inside yesterday's ranges. The dollar briefly and barely popped above JPY110. Some participants are picking a top to the greenback by buying the Canadian and Australian dollars.
Equities are mixed. The MSCI Asia Pacific Index rose 0.5% and the MSCI Emerging Markets Index is up 8% for a fourth consecutive advance. Recall the MSCI EM index has fallen in six of the past seven weeks including the last three. European shares are slightly heavier and the Dow Jones Stoxx 600 is putting at risk the four-day advancing streak. Still, it is closing in on its seventh weekly advance. Major bond markets are little changed, with Italy, as we noted trading heavier in the wake of the political developments. The US 10-year yield is steady a little below 3%. Oil is extending its gains.
The Reserve Bank of New Zealand sent the New Zealand dollar sharply lower as the new central bank governor sounded an unexpectedly dovish note. The election result in Malaysia led to a defeat of the ruling party that has led the government for more than 60 years. In Italy, Berlusconi has dropped his opposition to a government by the Five Star Movement and the Northern League. If a deal can be struck, a technocrat government or new elections can be avoided.
At his first meeting since becoming Governor of the Reserve Bank of New Zealand, Orr pushed in a dovish direction even though the cash rate was left unchanged at 1.75%. The first rate hike was pushed out from Q2 2019 to Q3. The estimate for Q1 GDP was shaved to 0.7% from the 0.8% forecast made in February. Perhaps most importantly, or seemed to replace the tightening bias with a neutral stance, saying that the next move in interest rates could be up or down.
