Will New Zealand cut interest rates overnight?

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Boring. Dull. Two words that could have been used to describe the foreign currency exchange markets yesterday. Currency ranges were less than half a cent. Sterling faded by 40 ticks against the US dollar and edged 20 ticks higher against the Euro while advancing a quarter of an Australian cent and remaining unchanged against the NZ Dollar, the Swiss Franc and the South African Rand.

German factory orders, the day's only Eurozone data release, were up by 2.9% in January, improving on forecasts of 2.5% but not encouraging enough to see the Euro strengthen.

Overnight, Australian consumer confidence fell from 1.9% to -2.4%, having a detrimental effect on the Australian Dollar but not a long-lasting one.

Today, The UK trade figures for January are released with expectations for the deficit to increase due to higher oil, food and commodity prices. The markets on the other hand are expecting the deficit to narrow to £8.5bn from £9.3bn last time around; if we do see it widening it could damage Sterling and reduce the likelihood of the Bank of England raising interest rates tomorrow.

There is no data from the Eurozone today other than second tier German industrial production and Swiss inflation, so expect another boring day for the Euro. There is the New Zealand manufacturing sector PMI overnight and, more importantly, the Reserve Bank of New Zealand's monetary policy decision would has the potential to move the markets.

New Zealand's Prime Minister made his feelings clear last week and advocating a cut in interest rates. Before he spoke on the subject analysts were inclined to think the RBNZ would cut rates, now though, Governor Alan Bollard faces a dilemma and whether he bows to political pressure. The uncertainty sets things up for a post-announcement rally for the New Zealand Dollar if interest rates remain on hold.