New Zealand Dollar Hits 25 Year High as Strong Data Signals More Rate Hikes (page 2 of 2)

Money supply growth slowed slightly, but that did not stop Finance Minister Cullen from warning that the "economy is growing unsustainably fast" and "growing demand and incomes have created inflationary pressures."

Even though Cullen is not the head of the central bank (Bollard is), New Zealand government officials are clearly aligned when it comes to monetary policy outlook. Higher inflation and faster growth can only mean one thing, which is more rate hikes. New Zealand and Canada both have GDP due for release in the next 24 hours, so expect more active trading.

British Pound above 2.0 after Hawkish Bank of England Comments

The British pound broke above the 2.0 barrier following much stronger than expected house prices in the month of June.

Originally expected to remain steady, house price growth doubled expectations. Next week, the Bank of England is set decide on interest rates and given recent economic data, there is a decent chance that the central bank will raise interest rates to 5.75 percent. Bank of England Governor King said this morning that the balance for inflation risks still remain on the upside and indicated that 25bp hikes will not do much to hurt domestic consumption.

These are the words of a hawkish central banker which says a lot a week before an interest rate decision. Tomorrow we have the GfK consumer confidence report. No major changes are expected there as stronger retail sales and higher house prices offset weaker average wage growth.

Euro Sells Off Despite Stronger Labor Market and Inflation Picture

The Euro has sold off for the fourth consecutive trading day but the degree of the four day weakness pales in comparison to the typical moves that we are accustomed to seeing in the EUR/USD.

Central banks like the ECB must be delighted with this lack of market volatility and as traders it has become the perfect currency to range trade. General interest in trading the Euro has waned according to the latest FXCM Speculative Sentiment index.

Economic data released this morning was mixed. Even though the unemployment rate dropped in Germany and the retail PMI improved, a big drop in French retail PMI dragged overall Eurozone activity lower.

Money supply was higher than expected, highlighting the inflationary pressures that the Eurozone still faces. German retail sales and French unemployment are due for release tomorrow. Spending is expected to drop after rising strongly in the month of April.

However the improvement in the labor market and the rise in the IFO consumer survey suggest that another rise is not of the question.