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The US Dollar and Brazilian real pair is bound to reach its resistance after the all-important Brazilian oil auction flopped last week. The high-profile event’s failure will cause a domino effect on the real and Brasilia’s economy. The Brazilian government first expected to lure in about 106.5 billion reais into the federal budget to aid its tight situation. However, with only three firms participating in the oil auction, the government only managed to get 70 billion reais in signing fees. A poll on economist found that the forecasts for Brazil’s primary budget deficit for this year were lowered and raised the deficit growth next year. Latin America’s largest economy is also in trouble if China decides to reduce some of its agriculture shipments from Brazil and opts to purchase American products as part of the trade deal of Beijing and Washington. The oil auction, shipment concerns, and the strengthening dollar will send the USDBRL higher.
The kiwi immediately surged against the greenback in today’s trading after NZD traders received a much-needed confidence boost from the recent RBNZ news. The strengthening US dollar didn’t stand a chance against the New Zealand dollar. Earlier today, the Reserve Bank of New Zealand announced during their policy meeting that the bank will hold on to its current OCR. The current Official Cash Rate of the RBNZ sits at an all-time low of 1%. The NZDUSD pair jumped over 1% in today’s trading, just in time to save the kiwi from breaching its support levels. The Reserve Bank of New Zealand boldly said that there is no urgency for the bank to ease rates in Wednesday’s meeting, this comes in contrast to expectations that it will ease. Although some experts believe that the central bank will eventually ease its official cash by 25 basis points to 0.75%. Nevertheless, the same 25 bps cut was also expected prior to today’s announcement.
The Euro to Danish krone pair currently receives support from the large discount in the FX forwards and the flow of vacation money – courtesy of the reform in the Danish system – that are coming in since September this year to August next year, according to the Danske Bank. However, the gradual progress seen in the bloc will eventually push the EURDKK pair near resistance. The Danmarks Nationalbank recently published its October FX data showing that the bank sold approximately 0.4 billion Danish krone of FX reserves just last month. This is the first FX intervention from the Danmark Nationalbank since January. The FX spending is the reason for the limitation of the EURDKK’s rally in previous sessions, however, the effect isn’t for the long term. That partnered with the rebound of the bloc’s economic powerhouse will result into the pair’s uphill climb in the coming trading sessions.
The Hungarian forint surprisingly is underperforming despite Hungary’s inflation continues to expand. The single currency to forint pair continues to inch up despite positive Hungarian inflation data and amid recovering eurozone. Inflation expanded 2.9% last month and the key tax-adjusted inflation figure also went up to 3.7%. According to recent data, Budapest is underperforming compared to its peers in Central Europe despite October inflation growth exceeding forecasts. Perhaps the main factor that drives the pair upward is the difference in the approach of each’s central banks. The Hungarian Central Bank is sticking to its ultra-loose monetary, having a base rate at 0.9% and the overnight deposit rate at -0.05%. Meanwhile, the European Central Bank is still on its QE infinity approach. The forint’s weakness comes from the ultra-loose monetary policy, in fact, the bank has the loosest monetary policy in the entire Central Europe region.