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Forex Flash: RBNZ rate hike expected within 12 months time – BNZ

Across the swap curve, now, NZ yields have convincingly broken out of their eight-month ranges. A string of stronger-than-expected domestic data releases saw NZ swap yields rise 13-20bps last week – Friday’s strong retail sales data was sufficient to boost NZ swap yields a further 2-5bps.

The market ended the week fully pricing a 25bps rate hike from the RBNZ by 12 months’ time. According to the BNZ Research Team, “We continue to expect a first hike in December and steady hikes thereafter. We see the OCR moving to a cyclical peak of 4.50% in early 2015. Market swap pricing is currently consistent with an OCR at just 3.25% by early 2015, and at only 4.00% in five years’ time. Ultimately, we therefore see swap yields have a lot further to rise.”

Moreover, “We still believe there will be periods where yields get knocked lower when market optimism is undermined. However, we no longer feel that the bottoms of previous trading ranges are likely to be revisited. The momentum in the NZ economy seems to have convincingly turned. We would therefore now be looking more actively for opportunities to hedge against future rate hikes – dips in yields present these opportunities.” they add.

European markets down in slow day after G20 weekend

The German DAX 30 (+0.17%) but is alone in its quest to the upside. European markets are down in the G-20 hangover: the French CAC 40 (-0.23%), the Italian FTSE MIB (-0.77%), the Spanish IBEX 35 (0.86%). Ahead is ECB Draghi's speech at 14:30 GMT. Investors don't expect much of the rest of the day, with an empty economic calendar and US and Canada markets out of the picture, on holidays. Futures for the American S&P 500, Nasdaq 100 and Dow Jones are trading flat.
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Forex Flash: Sterling posed for further weakness – Rabobank

The pound continues to trade in the region of 1.5470/75 on Monday, level last seen in July 2012, thus extending its decline further from year highs above the 1.63 figure. The descent...
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