Stats, the BoC and Geopolitics to Whipsaw the Majors

Earlier in the Day:

Following a quiet start to the week, economic data was on the heavier side this morning.

New Zealand business confidence and the RBNZ’s financial stability report provided direction early on.

For the Kiwi Dollar

The Financial Stability Report was released in the early hours. According to the latest report, key comments included:

• Some households and dairy farms are over-indebted.
• High debt and asset prices could amplify global financial system disruptions.
• The RBNZ proposed larger capital buffers for the financial system.
• The RBNZ imposed loan-to-value restrictions on banks’ mortgage lending to improve the resilience of households and banks.

The Kiwi Dollar moved from $0.65404 to $0.65413 upon release of the financial stability report that preceded business confidence figures.

New Zealand’s ANZ Business Confidence Index increased from -37.5 to -32.0 in May. According to the latest survey,

• While firms’ views of their own activity rose by 2 points to +9, other activity indicators were mixed.
• Employment intentions fell by 4 points to 0.
• A net 36% of firms expect it to be tough to get credit, down 1 point.
• Export intentions fell 2 points.
• Profit expectations rose by 3 points to a net 10% expecting profit to decline.
• A net 3% of firms are expecting to lift investment, up by 1 point.

The Kiwi Dollar moved from $0.65488 to $0.65474 upon release of the report. At the time of writing, the Kiwi Dollar was down by 0.02% to $0.6542

Elsewhere

At the time of writing, the Japanese Yen was up by 0.09% to ¥109.28 against the U.S Dollar, with the Aussie Dollar was up 0.06% to $0.6928.

The Yen found support from the shift in risk appetite through the European and U.S session on Tuesday that spilled over to the Asian session this morning.

In spite of the risk aversion, the Aussie Dollar managed to recover from early losses, though the upside remains limited for now.

In the equity markets

It was red across the majors, with the Nikkei leading the way, down by 1.25% at the time of writing. Concerns over the global economic look offset any upbeat sentiment towards progress on U.S – Japan trade talks. The latest U.S – China trade war chatter also weighed on the majors. The Hang Seng and CSI300 were down by 0.33% and by 0.41%, while the ASX200 closed out the day down 0.7%.

The Day Ahead:

For the EUR

Economic data due out of the Eurozone is on the heavier side in the day ahead.

French consumer spending, prelim inflation, and 2^nd estimate GDP numbers for the 1^st quarter are due out ahead of Germany’s May unemployment figures.

Barring particularly dire numbers out of France, we expect market focus to be on the German unemployment numbers on the day.

With no material stats due out of the U.S to influence market risk sentiment, any trade war chatter will influence later in the day.

At the time of writing, the EUR was up 0.04% to $1.1164.

For the Pound

Yet another quiet day on the economic calendar leaves Brexit and chatter from Parliament in control of the Pound through the day.

The Pound has struggled this week, with Brexit uncertainty taking its toll. We can expect the lack of economic data to ultimately be negative for the Pound this week.

At the time of writing, the Pound was up 0.05% to $1.2659.

Across the Pond

There are no material stats due out of the U.S this afternoon. The lack of stats will leave Oval Office chatter and market sentiment towards Trump foreign policy to influence on the day.

At the time of writing, the Dollar Spot Index was down 0.03% to 97.923.

For the Loonie

The market wait is over, with the BoC delivering its May monetary policy decision late this afternoon.

Expectations are for the BoC to steer clear of any rate hike chatter and maintain a status quo stance on policy.

While a positive outcome is a progress on a resolution to U.S metal tariffs on Canada and Mexico exports to the U.S, the extended U.S – China trade war and softer inflation figures will support a hold on monetary policy.

The Loonie was down 0.08% at C$1.3483, against the U.S Dollar, at the time of writing.