After weeks of tier one economic reports from all corners of the world, the lack of market-moving data outside of the Reserve Bank of New Zealand’s rate decision meant the possibility of quiet consolidative trade. However, we saw the complete opposite this week, as the central banks of New Zealand and the UK dropped hints of tightening.
This follows the Reserve Bank of New Zealand’s forecast of a rate hike in the second quarter of 2022. This was the first official forecasts from the central bank since the pandemic, and for now is a call that is more aggressive than the Federal Reserve and the European Central Bank. Hence, we expect NZD and GBP to outperform other major currencies in the weeks ahead.