The Reserve Bank of New Zealand has become the first major central bank to signal an end to rate hikes after raising its official rate to 5.50%, sending the New Zealand dollar sharply lower.

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1. As expected, the RBNZ raised its official rate by 0.25% to 5.50%.to the highest rate offered by any major central bank. However, the bank surprised by making it clear that this would be the final rate hike of the current tightening cycle, confirming 5.50% as the final rate. Governor Orr said the latest inflation figures were “encouraging”. Markets responded with a strong sell-off in the New Zealand dollar.
2. Stock markets opened higher yesterday until it became clear that the impasse over the US debt ceiling was nowhere close to being resolved, sending stocks sharply lower, although there was some recovery in recent hours. Initially seen yesterday the NASDAQ 100 index hit a new 18-month high. Trend traders may still find going long on several stock indexes attractive at this time.
3. The US dollar is selling weakly in the forex marketin line with its long-term trend after yesterday’s rise. Action so far today has been dominated by the weakness of the New Zealand dollar and the strength of the British pound. Trend traders will likely look for long trades in USD/JPY and GBP/USD currency pairs, with the former hitting a new 5-month high last week.
4. UK CPI (inflation) data will be released, which should show annualized inflation falling very strongly, from 10.1% to 8.2%.
5. The minutes of the FOMC’s recent trench meeting will be released later today.
6. Some soft commodities have made new highs and are trending strongly, esp Cocoa NIB ETFwhich rose very strongly on Friday and closed at a new 5-year high.