Markets are not making progress in anticipation of the FOMC meeting on Wednesday. There are no reasons for the movements, except for the correction of positions, as happened after the publication of data on US inflation. As a reaction, the UST yield increased, but it had practically no effect on the dollar quotes. The NASDAQ index, which is sensitive to the level of rates, reacted with an increase, metal prices slightly adjusted down, and stock indexes of most countries are trading in a narrow range.
There were also no revelations at the G7 meeting in Cornwall that could set the market in motion. The opening of the UK economy was postponed for 4 weeks due to the wave of the spread of the Indian strain of coronavirus, but even this event did not affect the quotes.
On Wednesday, there will be another key event – a meeting between Putin and Biden, which could have a strong impact on global demand for risk if surprises do occur. There is no insider on either side, although there will certainly be certain agreements.
The demand for risk is supported by the growing oil prices, which is probably one of the few drivers of demand for risk these days.
New Zealand's economy continues to recover, but growth is slowing. The PSI index for the services sector in May was 56.1 p, lower than the record 61.2 p a month earlier, but higher than the long-term average of 53.9 p. Good growth was noted for new orders and sales, but deliveries have been steadily declining for 10 consecutive months.
On the other hand, issues with supplies, which are expressed in a reduction in the availability of resources, delays in transportation, and a general increase in costs, lead to the fact that inflationary expectations are growing. Most likely, inflation will begin to grow aggressively (data will be published in July) starting from the second quarter, which will force the RBNZ to take additional measures to contain prices.
It is possible that the RBNZ will change the forecast for rates in the direction of their earlier increase at the next meeting on July 14. If players conclude that the probability of such a development will increase, then NZD will begin to be in demand again and restore the bullish trend. For now, this is just speculation, meaning the New Zealand dollar continues to be under pressure.
There are minimal weekly changes in the NZD futures market. The net long position fell by 34 million to 394 million, and the settlement price is kept below the long-term average, which indicates a small bearish advantage.
The level of 0.7120 was expectedly tested, but the momentum is not strong enough for the decline to intensify. The upward correction may find resistance at 0.7174, after which selling is likely to resume. The nearest target is set at 0.7109, followed by 0.7065.
The minutes of the RBA's June 1 meeting, released this morning, did not contain anything that could be called unexpected. There is both an improvement in the global outlook and uneven recovery. In particular, the Australian economy is experiencing a decline in household consumption along with the "mixed" state of the labor market. Wage growth is also at a historically low level.
At the same time, inflation and wage pressure are weak, so the RBA's monetary policy does not need to be adjusted yet. The situation is rather neutral for the Australian dollar, with a slight bearish bias, since there are no hints of a monetary policy correction towards tightening.
The Australian dollar continues to sell-off. Over the reporting week, the net short position increased by 581 million, to -731 million. The estimated price is below the long-term average and continues to decline.
The AUD/USD pair continues trading in a range. An exit from which is more likely to be downward. The question of whether a strong bearish impulse will form will become clear on Wednesday evening. In the meantime, we can consider the support zone 0.7530/60 as the nearest target.