The RBNZ Slashes the Kiwi as Trade Talk Jitters Linger

Earlier in the Day:

It was a relatively busy Asian session this morning. Key stats released during the Asian session included April trade data out of China and retail sales figures out of the UK.

On the monetary policy front, the Bank of Japan released its monetary policy meeting minutes from its April meeting and the RBNZ delivered its May decision.

For the Kiwi Dollar,

The RBNZ cut the official cash rate from 1.75% to 1.50%, which was largely expected.

From the RBNZ monetary policy statement, salient points included:

• While having supported employment and inflation, economic growth has slowed recently as headwinds have emerged.
• Trade disputes between major economies have reduced global trade, leading to delays in investment.
• Domestically, a lack of confidence in the economic outlook has resulted in reduced business investment.
• Slower growth appears to be continuing in 2019 and this is expected to dampen employment and inflation.
• Lower interest rates are needed to support the economy.
• The statement also noted that there may be a need to change the OCR to help stabilize employment and inflation. The statement suggesting that more could be on the horizon.

The Kiwi Dollar tumbled from $0.65996 to a session low $0.65251 upon the RBNZ announcement, which preceded the press conference. At the time of writing, the Kiwi Dollar was down 0.48% to $0.6572.

In the press conference:

RBNZ Governor Orr talked of surprise over the fall in business investment and consumer spending. Concerns over the U.S – China trade war raised plenty of uncertainties over what lies ahead.

Out of China,

The U.S Dollar trade surplus narrowed from $32.67bn to $13.84bn in April.

• Exports fell by 2.7%, which was worse than a forecasted 2.3% increase. Exports had surged by 14.2% in March.
• Imports rose by 4%, coming in well ahead of a forecasted 3.6% fall. Imports had fallen by 7.6% in March.

The Aussie Dollar moved from $0.70215 to $0.7019 upon release of data. At the time of writing, the Aussie Dollar was up 0.16% to $0.7023.

Elsewhere,

At the time of writing, the Japanese Yen was up 0.21% to ¥110.03 against the U.S Dollar. The dated BoJ minutes had no impact on the Yen this morning, as the markets continued to fret of the U.S – China trade war.

The Day Ahead:

For the EUR,

It’s a relatively quiet day on the economic calendar. German industrial production figures for March are due out later this morning.

Following weaker than expected factory order numbers on Tuesday, today’s stat is expected to be EUR negative, supported by the disappointing manufacturing PMI numbers seen through the current year.

While the EUR showed resilience to the weak numbers on Tuesday, it remains to be seen whether the EUR can hold on later this morning.

The EU Commission’s latest growth forecasts could come into question should the data be dire.

Outside the numbers, ECB President Draghi is due to speak later today. Any policy talk will be of interest.

At the time of writing, the EUR was up 0.13% at $1.1205.

For the Pound,

April house price figures are due out of the UK later this morning. The Pound will likely brush aside the figures.

Earlier this morning the UK’s BRC Retail Sales Monitor jumped by 3.7%, year-on-year in April, coming in well ahead of a forecasted 2.4% rise. Economic data out of the UK continues to surprise, providing with the Pound with some much-needed support early on.

Unsurprisingly, the focus remains on Brexit through the day. With the government setting a 1^st July deadline for a deal to be in place, it’s going to be an interesting run-up to the EU Parliamentary elections…

Will Theresa May will be able to see a deal through or is a vote of no confidence on the cards.

At the time of writing, the Pound was up 0.02% to $1.3078.

Across the Pond,

It’s another quiet day ahead on the economic calendar. There are no material stats due out of the U.S this afternoon.

With no data to consider, the focus will remain hinged on the U.S – China trade talks. The U.S government has upped the ante… Will the Chinese government flinch or play hardball?

Updates from both sides ahead of trade talks scheduled to begin tomorrow will be of influence.

At the time of writing, the Dollar Spot Index was down 0.17% to 97.463.

For the Loonie,

House price figures are due out later today that will unlikely have an impact on the Loonie this afternoon.

The U.S – China trade war and impact on crude oil prices will likely be the key driver through the day.

Any hint of China abandoning tomorrow’s talks and C$1.36 levels could come into play.

The Loonie was up 0.11% at C$1.3459, against the U.S Dollar, at the time of writing.