The RBA Turns Dovish, with Focus on Trade to Persist Throughout The DayChatter on trade remains the key driver, with negative updates from Beijing weighing on risk appetite early. The RBA added further pressure on the Aussie.
Earlier in the Day:
It was a quiet day on the economic calendar through the Asian session this morning.
Key stats were limited to New Zealand 3rd quarter wholesale inflation figures released in the early hours
For the Aussie Dollar, the RBA meeting minutes also influenced.
On the geopolitical risk front, negative news from Beijing on trade weighed on risk appetite in the early part of the day. News of China having issues with Trump’s unwillingness to rollback tariffs raised doubts over a phase 1 agreement. There were suggestions that Beijing may decide to wait until after the impeachment hearings and presidential election…
For the Kiwi Dollar
The Producer Price Input Index rose by 0.9% in the 3rd quarter, quarter-on-quarter, following a 0.3% increase in the 2nd quarter. Economists had forecast a 0.5% rise.
According to NZStats,
- Quarter-on-quarter, the farm expenses price index (FEPI) rose by 0.9%, with the capital goods price index (CGPI) rising by 0.8%.
- Year-on-year, prices paid by producers (input PPI) rose by 2.1%.
- Prices received by producers, (output PPI) rose by 1.0%, quarter-on-quarter, and by 1.8%, year-on-year.
The Kiwi Dollar moved from $0.63977 to $0.63979 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.16% to $0.6388.
For the Aussie Dollar
Salient points from the RBA meeting minutes from 5th November included:
- While the outlook for the global economy remained reasonable, downside risks persisted.
- Outlook towards the Australian economy was little changed since August.
- Accommodative monetary policy and fiscal policy support were expected to support 2.75% growth in 2020 and around 3% in 2021.
- Uncertainty over the outlook for domestic consumption remained. A sustained period of only modest increases in household disposable income continued to weigh on consumer spending.
- Employment had continued to grow strongly, with the unemployment rate expected to decline gradually from around 5.25%.
- Members expect wage growth to remain subdued for some time yet.
- Inflation pressures also remain subdued, due to low housing-related prices and slow growth in labor costs and administered prices.
- Members expect inflation to increase gradually to close to 2% in 2020 and 2021, however, in response to tightening labor market conditions.
- The Board agreed that a case could be made to ease monetary policy at the meeting but decided it appropriate to hold back and make another full assessment once more evidence of the effects of earlier rate cuts had become available.
- Concerns over the negative effects of lower rates on savers and confidence contributed to the decision to stand pat.
The Aussie Dollar moved from $0.68056 to $0.67922 upon release of the minutes. At the time of writing, the Aussie Dollar was down by 0.25% to $0.6794.
The Japanese Yen was up by 0.09% to ¥108.58 against the U.S Dollar, with negative sentiment towards trade providing support to the Yen.
The Day Ahead:
For the EUR
It’s another quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.
The lack of stats continues to leave the EUR in the hands of geopolitics on the day.
At the time of writing, the EUR was down by 0.03% to $1.1069.
For the Pound
It’s another quiet day ahead on the data front. Key stats are limited to November CBI Trend Orders out of the UK.
Following some particularly dire numbers out of the UK last week, the CBI figures are unlikely to have a material impact on the Pound.
UK politics is likely to remain the key driver all the way through to 12th December.
At the time of writing, the Pound was down by 0.02% to $1.2951
Across the Pond
It’s a relatively busy day on the economic calendar. Economic data out of the U.S include October building permits and housing starts.
We can expect the Dollar to find some direction from the numbers, though much will depend on trade chatter from the U.S.
Things could get choppy for the Dollar should there be a lack of progress towards a phase 1 agreement. Trump may also respond to the recent news from Beijing with the threat of more tariffs.
The Dollar Spot Index was up by 0.05% to 97.844 at the time of writing.
For the Loonie
It’s a relatively quiet day on the economic calendar. Manufacturing sales figures for September are due out later today.
We would expect the stats to have a muted impact on the Loonie, however, with risk sentiment continuing to be the key driver.
The Loonie was down by 0.04% to C$1.3211, against the U.S Dollar, at the time of writing.