Intervention by the Reserve Bank of New Zealand? (page 2 of 2)

This includes retail sales, consumer prices, industrial production and the jobless rate. Higher inflation would be needed to resurrect rate hike speculations.

Intervention by the Reserve Bank of New Zealand?

Was there intervention by the Reserve Bank of New Zealand today? Nothing was confirmed, but the intraday price action of the New Zealand dollar certainly suggests so.

Around 3:15pm EST, the NZD/USD dropped 55 pips in 1 minute. Having lived through many Bank of Japan interventions, this type of movement can only be related to one of two things. The first being intervention, the second being a big merger or acquisition flow.

Given that the NZD/USD hit a fresh 22 year high today, there is a stronger chance that what we witnessed today was indeed intervention, especially since the move came at the exact same price level as the officially confirmed intervention seen on June 11th.

It is not a stretch to say that the RBNZ is not happy with the persistent climb in the NZD/USD despite their first dose of intervention ever. What we have learned about intervention is that oftentimes it does not work.

Even though the New Zealand economic calendar is chock full of key economic data next week, including the trade balance, current account balance and GDP, the demand for high yielding currencies will continue to be the primary driver of the NZD.

The Australian dollar fell in sympathy to the kiwi, after having soared to a fresh 16 year high. The only key event on the Australian calendar is leading indicators Monday night. The Canadian dollar on the other hand regained strength on the back of rebounding oil prices. The only noteworthy piece of CAD data is industrial and raw material prices.

Euro and Swiss Franc Surge on Hawkish Comments

The Euro finally broke out and hit a 2 week high today despite a weaker than expected German IFO report.

Business sentiment has deteriorated in June, which is in line with the softer analyst sentiment reported earlier this month. The combination of weaker retail sales, a strong currency and higher interest rates has made it much more difficult to do business than prior months.

The strength of the Euro today came from broad dollar weakness as well as extremely hawkish comments from ECB President Trichet, who basically confirmed that higher rates are to come.

The Swiss franc staged an exceptionally strong move today thanks to hawkish comments from SNB President Roth. He was optimistic about growth and employment, which paves the way for further rate hikes this year.

British Pound Rallies on Potential UK Protectionism

The British Pound came within an arms length of the psychologically important 2.0 level. Although there was no new data released, traders continued to be very excited about the potential for 6% interest rates by the end of the year.

It appears that the UK may be exercising its own form of protectionism. A UK paper reported that the government could restructure its tax rules to make it more difficult for UK companies to have their headquarters overseas.

Even if this is true, it would take months to implement. The economic calendar is light but Prime Minister Tony Blair steps down next week, which will be a big focus.