Global macro overview for 24/10/2017

Global macro overview for 24/10/2017:

The New Zealand Dollar is usually strong in the periods of risk appetite, but in recent days has been hit by the domestic political developments. The overnight bumps sparked reports that the new government is planning to "revise and reform" the law governing the Reserve Bank of New Zealand. This statement at first glance sounds disturbing, in fact, it may not be so. The 1989 law gives the exclusive right to the president of the RBNZ, while decisions are now made by a committee composed of a president and two vice presidents. The bill does not provide for the publication of a report after the meeting (Meeting Minutes), however, this takes place anyway.

Moreover, today the governing coalition has announced plans to raise the minimum wage - a pro-inflation factor, which should strengthen expectations of interest rate hikes. The minimum wage will go up to $20 by 2021. Jacinda Ardern, New Zealand PM, said: "We are a low wage economy... New Zealanders deserve a wage they can live on... it is no longer acceptable to try and expect families to survive on the minimum wage as it currently is." The $16.50 payout is starting in April 2018, will rise in steps since then.

Let's now take a look at the NZD/USD technical picture at the daily time frame. After the test of the golden lower channel line, the price reversed and is currently trading below the technical support at the level of 0.6970. The outlook is bearish and the next technical support is seen at the level of 0.6814. The key level to the upside is the gray rectangle zone between the levels of 0.7057 - 0.7089.

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