Risk Aversion Hits Forex Markets After Kiwi Central Bank Issues Warning

James Randall

A prominent central bank yesterday issued a dovish warning about the future directions of monetary policy – leading to a spell of low performance for most bar the dollar.

The Reserve Bank of New Zealand suggested that when it next changes interest rates, it is likely to go down rather than up. For now, it kept rates at their previous position of 1.75%.

However, several currencies around the world responded badly to the speech from the Bank, which joins a growing chorus of central bankers who appear to be against further rate rises.

The euro went down to $1.1237 in the EUR/USD pair, which followed similar dovish remarks from the European Central Bank’s president this week.

While the Japanese yen, which is known as a “safe haven” currency, did rise a little, it came nowhere close to the high point it achieved on Monday.

The dollar index, which measures the US dollar’s performance compared to various global currencies, posted its typical rise in the face of risk aversion – going up to 0.3% to reach 97.028.

With the forex trading week now winding its way to a close, it’s time to look at the remaining significant events on the economic calendar.

Today (Thursday), there will be a number of key data releases. Annualised US gross domestic product information for the fourth quarter of 2018 is out at 12.30pm GMT and is expected to shift from 2.6% to 2.4%.

Continuing jobless claims for the dates around March 15th are also out at 12.30pm GMT and are expected to show no change from 1,750,000.

Initial jobless claims for the period around March 22nd, meanwhile, are forecast to shift from 221,000 to 225,000 when they are released at the same time.

Over in Germany, there’ll be a harmonised index of consumer prices release at 1pm GMT. Year on year, this is expected to show a change from 1.7% to 1.6%.

In Japan, preliminary industrial production rates for February will be out at 11.50pm GMT. Year on year, this is forecast to change from +0.3% to -0.1%.

There’ll be several speeches from central bankers happening over the course of the day, too. At 11.15am GMT, there’ll be a speech from Randal Keith Quarles, who is a member of the US Federal Reserve’s Board of Governors and is its Vice Chair for supervision.

Richard H. Clarida is also a Vice Chair of the Fed’s Board of Governors, and he will speak at 1.30pm GMT.

Andréa Maechleris, who is on the Governing Board of the Swiss National Bank, is forecast to speak at 5pm GMT.

Looking ahead to Friday, German retail sales information for February is expected at 7am GMT. Month on month, it is expected to shift from +3.3% to -0.9%.

British gross domestic product data for the fourth quarter of last year is expected at 9.30am GMT. Year on year, this is due to show no change from 1.3%.

Personal spending figures covering January are due to come out of the US at 12.30pm GMT. These are expected to shift from -0.5% to +0.3%.

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James Randall
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