Markets Today: UK Inflation Hits 18-Month Highs, RBNZ Deliver Dovish Rate Cut, Tech Stocks Drag Indices Lower

[Ben Graham]

Asia Market Wrap - Tech Stocks Drag Indexes Lower

Most Read: Gold (XAU/USD) Hovers at $3350/oz, Russia-Ukraine Developments in Focus

Global stocks took a break after a record run, as a big drop in major tech companies pulled markets down. Futures suggest more losses ahead.

The MSCI Asia-Pacific index (excluding Japan) fell over 1%, Japan's Nikkei dropped 1.7%, and Hong Kong's Hang Seng Tech Index lost 1.3%.

Big names like Taiwan Semiconductor Manufacturing and SoftBank were among the biggest losers.

Market participants pulled back from tech stocks, which have been leading the market, worried that the rally since April has gone too far, too fast.

RBNZ Deliver Dovish Rate Cut

The New Zealand dollar dropped to a four-month low on Wednesday after the central bank cut interest rates as expected but hinted at more cuts if needed. This surprised markets and caused bonds to rally.

The Reserve Bank of New Zealand lowered the official cash rate by 0.25% to 3.0%, the lowest in three years, with a total of 2.5% cut over seven moves. Policymakers also reduced their forecast for the cash rate's lowest point to 2.55% (down from 2.85% in May). Notably, two of the six committee members wanted a bigger cut of 0.5%.

I did discuss the potential for a dovish rate cut and its effect on NZD/USD yesterday. For more on this please read RBNZ Meeting Preview: 25 bps Cut Expected. Will it be the Last Cut of 2025?

UK CPI Hot - Hits 18-Month High

The UK’s annual inflation rate rose to 3.8% in July 2025, the highest since January 2024, up from 3.6% in June and slightly above the expected 3.7%. Core inflation also edged up slightly to 3.8%.

The biggest increase came from transport costs, with airfares surging 30.2% due to school summer holidays. Motor fuel, sea fares, and roadside services also added to the rise. Inflation in restaurants and hotels went up, mainly due to higher hotel stay costs, and food prices also increased.

The British pound rose slightly after the data release, as investors now expect a longer wait for the next Bank of England (BoE) rate cut. A 0.25% rate cut isn’t expected until March 2026.

Earlier this month, a rate cut was seen as likely before the end of 2025. The BoE predicts UK inflation will reach 4% in September, double its target, and remain above 2% until mid-2027.

Source: LSEG

European Open - European Shares Slip

European stocks fell on Wednesday, pulling back from a five-month high reached the day before. Tech stocks followed the weak performance of U.S. tech shares, and the defense sector faced pressure for a second day.

The STOXX 600 index dropped 0.4% by early morning, with most major markets in negative territory. The UK’s FTSE 100 fell 0.2%, while defense stocks slid 1.5% after their worst day in over a month. This drop came as hopes for a Ukraine-Russia peace summit reduced demand for military-related stocks.

Tech stocks fell nearly 1%, following U.S. tech losses driven by worries about an AI stock bubble and uncertainty over interest rates. Meanwhile, Alcon shares plunged 9.8% after the eye-care company lowered its 2025 sales forecast due to expected U.S. tariffs.

On the FX front, The dollar index, which tracks the U.S. dollar against six other currencies, stayed flat at 98.319 after hitting a one-week high of 98.441 earlier.

The New Zealand dollar dropped 1.3% to $0.5815, its lowest since April 11, after policymakers lowered their expected cash rate floor to 2.55% from 2.85% in May.

The euro slipped 0.1% to $1.1636. The U.S. dollar rose 0.1% to 0.8078 Swiss francs but fell slightly by 0.1% to 147.61 yen.

Currency Power Balance

Source: OANDA Labs

Gold edged up slightly on Wednesday but stayed close to a three-week low. Investors are waiting for the Federal Reserve's July meeting minutes and the Jackson Hole symposium this week for hints about future rate cuts.

Spot gold rose 0.2% to $3,321.33 per ounce by 08:32 GMT, after hitting its lowest level since August 1. U.S. gold futures for December delivery also increased 0.2% to $3,364.20.

Oil prices rose on Wednesday after the American Petroleum Institute reported a drop in U.S. crude inventories. Investors are also watching for updates on talks to end the Ukraine war, with sanctions on Russian oil still in place.

On Tuesday, oil prices fell over 1% as hopes grew for a peace deal. However, U.S. President Donald Trump admitted that Russian President Vladimir Putin might not be ready to make an agreement.

By 08:12 GMT, Brent crude rose 55 cents (0.8%) to $66.34 a barrel. U.S. West Texas Intermediate (WTI) crude for September delivery, which expires Wednesday, went up 65 cents (1%) to $63.

Economic Data Releases and Final Thoughts

Looking at the economic calendar, a quiet day for Europe and the US.

The major event of the day comes from the US with the FOMC minutes release which could stoke some volatility. Beyond that markets will continue to monitor developments on the Russia-Ukraine front which could impact overall sentiment as well.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Day - NZD/USD

From a technical standpoint, NZD/USD on the daily timeframe is eyeing a break of the falling wedge pattern.

A falling wedge pattern usually precedes a bullish breakout, however, given the developments from today's RBNZ meeting a bearish breakout is looking more likely.

A daily candle close below the lower band of the wedge pattern is needed to confirm the breakout.

Such a candle close could open up a potential 220-pip drop toward the 0.5620 mark.

NZD/USD Daily Chart, August 20, 2025

Source: TradingView.com (click to enlarge)

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© 2025 OANDA Business Information & Services Inc.