Amongst the Majors, currency pairs, it seems likely that both the ECB, European Central Bank, and RBNZ, Reserve Bank of New Zealand will hike interest rates next.
The Majors are the most traded currency pairs in the world and have the highest market liquidity. They comprise of the EURO, US Dollar, Japanese Yen, Pound Sterling, Australian Dollar, Canadian Dollar, Swiss Franc, and the New Zealand Dollar.
In the last 24 hours, we've had both the ECB and RBNZ interest rate decisions.
Both kept rates unchanged, RBNZ at 2.5% and ECB at 1.25%, however hawkish comments by Trichet and Bollard have traders expecting a rate hike in the near future.
Reserve Bank of New Zealand
New Zealand left rates at 2.5% and RBNZ Governor Bollard made the following hawkish comments:
Bollard: says outlook for domestic economy improved
Bollard: econ activity significantly hurt by earthquake
Bollard: signs of recovery have continued
Bollard: timing of rate rises guided by speed of recovery
Bollard: forms expected to boost hiring, capital investment
Bollard: March 2012 CPI at 2%, March 2013 CPI at 2.2% expected
Bollard: fiscal consolidation to also dampen activity
Bollard: rate rise this year not inconsistent with view, NZD overvalued
Bollard: NZD overvalued, driven by high commodity prices
Bollard: expects the NZD Dollar to decline only gradually
Bollard: currency intervention can't move a trend
NZD/USD climbed higher on these comments to trade a record high of .8300.
The next RBNZ meeting will take place on July 27th.
European Central Bank
The ECB left rates at 1.25% this morning and these were some of the important comments made by Trichet at the press conference:
Trichet: continue to see upward pressure on overall inflation
Trichet: monetary analysis indicates that underlying pace of monetary expansion is gradually recovering
Trichet: strong vigilance warranted, using phrase that in past has signaled rate hike a month away
Trichet: risks to inflation outlook remain on upside
Trichet: determined to secure anchoring of inflationary expectations in EURO area
Trichet: rate decision was unanimous
Trichet: gdp growth in 2011 1.5% to 2.3% range versus 1.3% to 2.1% range in March
Trichet: inflation rates are likely to stay clearly above 2% over coming months
Trichet: important that US in favor of strong Dollar
Trichet: strong Dollar in US and global interest
Trichet: it's a mistake to embark on measures sparking default
Trichet: Ireland has benefit of flexible economy, verbal discipline is probably appropriate
Trichet: it's clear that European issues are important
Trichet: problems at stake are very serious; Europe has a balanced current account
Trichet: no objection to Draghi as next president; Draghi is person of recognized standing
The EURO sold off 100 pips after the comments but the words strong vigilance has always been a predictor for rates to increase one month after. The next ECB meeting will be held on July 7th.