FX News Today
Asian Market wrap: 10-year Treasury yields are up 0.4 bp at 2.953%, the 10-year JGB yield is up 0.3 bp at 0.101%, while New Zealand yields dropped -7.2 bp after the RBNZ pushed out its forecast for a rate hike by a year as it lowered its growth forecast. Stocks moved mostly higher during the Asian session, with Chinese markets rebounding and the CSI 300 rallying 2.55%, while the Shanghai Comp rose 1.88%, the Shenzen Comp 2.88%. Trade war concerns were put aside for now, despite China’s announcement of 25% on an additional USD 16 bln of US imports, which matched Trump’s latest move in the trade war. Separately the US also announced new sanctions on Russia. Japanese markets underperformed and Topix and Nikkei are down -0.15% and -0.05% respectively, but up from early lows as the yen moved down from overnight highs against the dollar. US futures are moving higher.
FX Action: The New Zealand Dollar has dropped sharply on the lead of RBNZ’s dovish guidance after the central bank left the official cash rate unchanged at 1.75%. The RBNZ signalled that a rate hike to 2.0% would come by December 2020, compared to its previous guidance for March 2020. In the nearer term, the central bank also stressed a neutral stance, saying that the next move could be a tightening or an easing. This was more dovish than markets had been anticipating, and NZDUSD dove by over 1% in making 0.6664, the lowest level seen since March 2016. NZDJPY declined by a slightly bigger magnitude, while AUDNZD rallied to a new high for the year. RBNZ Governor Orr said before parliament that the central bank is in “watch and wait” mode for now, and said during an interview with Reuters that the principal concern is low business confidence. He also affirmed that global trade tensions were “not good” for the open New Zealand economy, but said that current modelling wasn’t showing much impact yet.
Charts of the Day
Main Macro Events Today
- Canadian Housing starts and NHPI – Expectations – New home prices are seen rising 0.1% after the flat reading in May and starts are projected to moderate to a 220.0k pace from the lofty 248.1k growth rate in June.
- US PPI and Jobless Claims – Expectations – Headline and core PPI are projected to rise 0.1% in July, following a 0.3% increase in both measures in June, while initial jobless claims are estimated to fall 6k to 212k in the week ended August 4, following a 218k reading in the week of July 28.
- Japanese Preliminar GDP Q2 – It is anticipated at 0.3% q/q from the 0.2% in May. The 0.2% contraction was the first after nine straight quarters of growth and surely was a disappointment for the BoJ, which left its accommodative policy in place last week.
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Andria Pichidi
Market Analyst
HotForex
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