The Kiwi Takes a Hit as the Focus Shifts to Carney and the BoE

Brexit and the BoE will be in focus today. Will growth forecasts be revised downwards? The Pound could be in for a choppy day.
Bob Mason
BoE Policy Decision

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side. Stats were limited to 4th quarter employment figures out of New Zealand.

Outside the numbers, FOMC member Quarles and FED Chair Powell delivered speeches in the early hours.

For the Kiwi Dollar

According to figures released by NZStats,

  • The unemployment rate rose from a revised 4.0% to 4.3% in the 4th quarter, rising above a forecasted 4.1%.
    • New Zealand’s employment rate fell by 0.4pp to 67.8%, easing back from its peak at2% in the 3rd quarter.
    • The labor force participation rate fell by 0.1pp to 70.90%.
    • Quarter-on-quarter, employment grew by just 0.1%, compared with a 0.7% rise in the working-age population.
  • Year-on-year, the Labour cost index (LCI) increased 1.9% in the 4th Private sector wages rose by 2.0%, while public sector wages increased by 1.7%.

The Kiwi Dollar moved from $0.68301 to $0.67752 release of the figures. At the time of writing, the Kiwi Dollar stood at $0.6750, a loss of 0.38% for the session.

Elsewhere

The Japanese Yen stood at ¥109.95 against the Dollar, up by just 0.02% for the session. The Aussie Dollar was flat at $0.7105, with a jump in iron ore prices providing the Aussie Dollar with support in the early part of the day.

The Day Ahead:

For the EUR

Economic data scheduled for release through the day is limited to December industrial production figures out of Germany. Following consecutive monthly declines in factory orders and a contraction in Germany’s manufacturing sector, the numbers could come in softer than forecasted to weigh on the EUR. Forecasts are for a 0.7% rise in December.

With the EUR back at $1.13 levels, pressured by sentiment towards current economic conditions and the bloc’s economic outlook, EUR sensitivity to the numbers out of Germany will likely be heightened.

Outside the numbers, the ECB’s Economic Bulletin and European Commission forecasts are due out, which will also garner plenty of attention. The ECB’s taken a dovish view on the economy, so the markets will be looking out for any downward revisions to growth and inflation forecasts.

If bank earnings are anything to go by, the economic slowdown could be more pronounced than initially anticipated.

At the time of writing, the EUR was down 0.02% to $1.1360.

For the Pound

Economic data is limited to January house price figures. The numbers will likely be brushed aside, with the focus expected to be on today’s BoE monetary policy decision. While rates are expected to be on hold, Brexit leaving the BoE in a holding pattern, the Bank’s outlook on growth and inflation will be key considerations from the inflation report and meeting minutes.

Alongside an expected response to the BoE’s views on the economy, Brexit chatter will remain in focus. While the British PM continues to face hurdles over the Irish backstop, support for the Pound could come from any rise in prospects of a delay to the end of March departure from the EU.

At the time of writing, the Pound was flat at $1.2932, with Brexit chatter and the BoE the key drivers throughout the day.

Across the Pond

Economic data is limited to the weekly initial jobless claims figures. The Dollar showed a more marked response to the figures than normal last week. We can expect the same again should the figures disappoint.

Outside the numbers, FOMC member chatter will also be there to provide direction, as will any chatter from the Oval Office.

FOMC member Clarida is scheduled to speak later today. Earlier in the day FOMC member Quarles and FED Chair Powell spoke.

At the time of writing, the Dollar Spot Index was up by 0.34% to 96.39.

For the Loonie

There are no material stats scheduled for release, leaving the Loonie in the hands of market risk appetite and the direction of crude oil prices.

Yet more weak economic data out of Canada on Wednesday continues to support the dovish bias to the BoC and outlook on monetary policy. January’s Ivey PMI came in at 54.7 on Wednesday, sliding from December’s 59.7 and coming in well below a forecasted 56.4.

The Loonie was down by 0.19% to C$1.3239, against the U.S Dollar, at the time of writing.

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