The RBNZ Sinks the Kiwi. Next Up, the Press Conference…

The RBNZ flexed it’s muscles this morning. While the press conference is next up, geopolitical risk continues to be the main area of focus.
Bob Mason
RBNZ cuts rates by 0.25%, as expected
RBNZ cuts rates by 0.25%, as expected

Earlier in the Day:

It was a quieter Asian session on the economic calendar this morning.

Economic data through the session included Australia’s June home loan figures. While the stats were on the lighter side, the RBNZ delivered its August monetary policy decision this morning.

For the Aussie Dollar

According to the ABS, new home loans fell by 0.9% in June, month on month, which was worse than a forecasted 0.6% rise. New home loans were flat in May.

The Aussie Dollar moved from $0.67770 to $0.67780 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.16% to $0.6750.

For the Kiwi Dollar

The RBNZ cut interest rates by 50 basis points to 1.00%. The markets had anticipated a 25 basis point rate cut. Salient points from the rate statement included:

  • The Committee noted recent economic developments were broadly as expected and employment was around targeted maximum sustainable levels.
  • Inflation remained below 2%, however, with the outlook for employment and inflation softer.
  • Also on the negative, GDP growth had slowed and global conditions had weakened.
  • Private sector wage growth was also subdued, in spite of a shortage of skilled labor.
  • The effects of a slowdown in growth could dampen wage growth inflation more than projected.
  • Heightened global uncertainty was reducing investment and suppressing trading-partner growth.
  • It was acknowledged that additional spending from households, businesses and the government was important in delivering inflation and employment targets.
  • The Committee noted that business confidence had remained weak in mid-2019 and could limit growth over the medium-term.
  • Uncertainty over house price inflation could offset the effects of lower mortgage rates and the impact on house prices.
  • Members of the Committee noted that estimates of the neutral level of interest rates have continued to decline.
  • The Committee agreed to continue to monitor and assess the impacts of monetary policy, including transmission through to retail sales.

There was nothing hawkish monetary policy statement, with downward revisions supporting the RBNZ’s larger than an anticipated rate cut.

The Kiwi Dollar moved from $0.65452 to $0.64359 upon release of the rate statement and monetary policy statement. At the time of writing, the Kiwi Dollar was down by 1.10% to $0.6453. Next up, the RBNZ press conference…

Elsewhere

At the time of writing, the Japanese Yen was up by 0.34% to ¥106.11 against the U.S Dollar

In the Asian equity markets, it was a mixed bag at the time of writing. The CSI300 and ASX200 found support early on, rising by 0.535 and by 0.12% respectively. The Nikkei and Hang Seng were down by 0.46% and by 0.14% respectively.

In spite of the PBoC intervention on Tuesday, the Yuan continued to hold at CNY7.00 levels early on in the session. At the time of writing, the Yuan was down by 0.17% to CNY7.0315.

The Day Ahead:

For the EUR

It’s another relatively quiet day ahead on the economic calendar. Key stats due out of the Eurozone are limited to Germany’s June industrial production figures.

We could see the EUR under pressure should industrial production see worse than projected numbers.

Outside of the stats, geopolitical risk will continue to have an influence on the day.

At the time of writing, the EUR was up by 0.12% to $1.1212.

For the Pound

It’s a relatively quiet day ahead on the data front, with economic data due out of the UK limited to July house price figures. We would expect the stats to have a muted impact on the Pound as the focus continues to be on Brexit.

Expect the Pound to be particularly sensitive to any Brexit chatter. For now, the baseline story is of a no-deal Brexit. Any talk of averting a no-deal departure would provide much-needed support for Sterling.

At the time of writing, the Pound was up by 0.06% to $1.2178.

Across the Pond

It’s a quiet day for the Greenback, with no key stats due out of the U.S.

The lack of stats will leave the market focus on any chatter from the Oval Office. Any further retaliatory measures would place pressure on the Dollar.

At the time of writing, the Dollar Spot Index was down by 0.15% to 97.488.

For the Loonie

It’s a relatively quiet day ahead on the economic calendar. July’s Ivey PMI is due out later today, which will provide the Loonie with direction.

We can also expect crude oil inventory numbers to also provide direction, with the weekly EIA numbers due out later in the session.

The Loonie was up by 0.02% at C$1.3279, against the U.S Dollar, at the time of writing.

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