Geopolitics to Drive the Majors Through the Day

With economic data on the lighter side, geopolitics will be the key driver on the day.
Bob Mason
Light Board

Earlier in the Day:

It was a relatively busy day on the economic calendar through the Asian session this morning.

Key stats included New Zealand’s August trade data that preceded the RBNZ’s September monetary policy decision.

Outside of the stats, the markets responded to updates from the UN General Assembly, which weighed on sentiment towards trade and on tech stocks. U.S President Trump’s negative comments on trade and social media added to the negative risk sentiment this morning.

U.S political risk joined the laundry list of risks the markets need to consider late on Tuesday, which drove demand for U.S Treasuries. The negative sentiment spilled into the early hours as the Democrats call for impeachment talks.

For the Kiwi Dollar

The trade deficit widened from NZ$700m to NZ$1,565m in August, month-on-month. Economists had forecasted a widening to NZ$1,464m.

According to NZ Stats,

  • The value of total goods exports increased by NZ$151m (3.8%) from August 2018 to NZ$4.1bn.
    • Crude oil exports jumped by NZ$58m from August 2018, supporting the rise in exports.
    • There was also an increase in exports of fruit (NZ$57m).
    • Partially offsetting the pickup in exports were falls in LNG (down NZ$73m) and intreated logs (down NZ$51m).
  • The value of total goods imports in August 2019 rose by NZ$149m (+2.7%) from August 2018 to NZ$5.7bn.
    • An NZ$73m increase in the imports of crude oil, NZ$68m increase in aircraft parts and NZ$36m increase in fertilizers contributed.
    • Passenger motor car imports fell by NZ$39m (8.2%), however.

The Kiwi Dollar moved from $0.63235 to $0.63238 upon release of the numbers that preceded the RBNZ interest rate decision and rate statement.

RBNZ Monetary policy

The RBNZ held interest rates steady at 1% following last month’s larger than expected 50 basis point rate cut.

While the hold was in line with market expectations, the RBNZ Rate Statement provided direction. Salient points from the Rate Statement included:

  • Global trade and other geopolitical tensions remain elevated and continue to subdue the global growth outlook.
  • Business confidence remains low, reflecting policy uncertainty and low profitability in some sectors that are affecting business investment.
  • Fiscal policy is expected to lift domestic demand over the coming year, though government spending could be delayed.
  • Some members noted that ongoing low inflation could cause inflation expectations to fall. Others noted that this risk was balanced by the potential for rising labor and import costs.
  • It was noted that developments since August had not significantly changed the outlook for monetary policy.
  • If necessary, there remains scope for more fiscal and monetary policy stimulus.

The Kiwi Dollar moved from $0.63044 to $0.63455 upon the release of the rate statement. At the time of writing, the Kiwi Dollar was up by 0.35% to $0.6347.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.25% to ¥107.34 against the U.S Dollar, while the Aussie Dollar flat at $0.6801.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. There are no stats due out of the Eurozone to provide the EUR with direction.

A lack of stats will leave the market focus on Brexit, U.S – China trade war chatter and updates from the UN General Assembly.

With Iranian President Rouhani scheduled to speak, it could get choppy later in the day.

At the time of writing, the EUR was down by 0.15% to $1.1003.

For the Pound

It’s also a quiet day ahead on the data front. There are no material stats due out of the UK to provide the Pound with direction.

Brexit and British politics continue to be the key driver.

At the time of writing, the Pound was down by 0.12% to $1.2472.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Key stats are limited to August new home sales figures.

The numbers are unlikely to have a material impact on the Dollar, with geopolitical risk front and center on the day.

The Dollar Spot Index was up by 0.16% to 98.491 at the time of writing.

For the Loonie

It’s a quiet day ahead on the economic calendar once more. There are no material stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment and the weekly EIA crude oil inventory numbers.

The Loonie was down by 0.07% at C$1.3252, against the U.S Dollar, at the time of writing.

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