Global Markets:
• Asian stock markets: Shanghai Composite gained 0.05 %, Hang Seng rose 0.25 %, ASX 200 lost 0.60 %, Nikkei closed for holiday
• Commodities: Gold at $1348 (-0.30 %), Silver at $20.13 (-0.20 %), WTI Oil at $41.55 (-0.40 %), Brent Oil at $43.90 (-0.35 %)
• Rates: US 10 year yield at 1.51, UK 10 year yield at 0.52, German 10 year yield at -0.12
News & Data:
• Bank of Korea Leaves Its Key Rate Steady at 1.25% As Expected
• UK RICS House Price Balance (Jul): 5% (exp 6% prev rev 15%)
• Singapore GDP (YoY) Q2, F: 2.1% (exp 2.2% flash 2.2%)
• Singapore GDP (QoQ) Q2, F: 0.3% (exp 0.8% flash 0.8%)
• PBoC Fixes Yuan Reference Rate at 6.6255 (prev 6.6530)
Reserve Bank of New Zealand Rate Decision:
• RBNZ Cuts Its OCR by 25bps to 2.00% As Expected
• RBNZ: Further Policy Easing May Be Needed
• Monetary Policy to Remain Accommodative
• Closely Watching Economic Data
• Weakness in Inflation Risks Further Drop in Inflation Expectations
• Sees Annual CPI 1.0% Dec 2016 (prev 1.3%)
• A Decline in NZD Is Needed; sees TWI NZD at Around 75.9 By Dec 2016
• House Price Inflation Remains Excessive, And Is More Broad Based
• Growth Supported by Migration, Construction and Tourism
• RBNZ Gov Wheeler: Would Like to See Most of Rate Cut Passed On by Banks
• Wheeler: RBNZ Has Built 60bps of Cuts into Projections
• Wheeler: Not Surprised by NZD Move After Today's Decision
• Wheeler: Will Look at NZD Reaction Over Coming Days
• Wheeler: Would Be Concerned If There Was a Further Drop in ST Inflation Expectations
• Wheeler: RBNZ Has Limited Influence Over NZD
• Wheeler: Wage Moderation Greater Than RBNZ Expected
• Wheeler: Debt to Income Tool Unlikely to Be Implemented This Year
• Wheeler: Want NZD to Fall, want to Take Pressure Off NZD with Lower Rates
• ANZ Now Looking for 2 More 25bps Cuts from The RBNZ
• RBNZ Assistant Gov McDermott: Central Bank Projections Show One More Cut Likely, Another Possible
• McDermott: Does Not Give Timeframe for Cut but Says We Have a Big Chance to Assess in November
• McDermott: High Exchange Rate Was a Key Concern
• McDermott: If NZD Higher Than Forecast, Risk of More Rate Cuts Increases
Markets Update:
The Reserve Bank of New Zealand cut rates by 25 bps, as expected. NZD/USD rallied sharply after the statement was released and reached a high of 0.7340, up 160 pips from the previous low. The rate cut was already fully priced in, so the market was reacting to the less dovish than expected statement. Later in the session, NZD retraced some of its gains as RBNZ Governor Wheeler and Assistant Governor McDermott expressed their concerns about the high exchange rate. McDermott stated that if the NZD continues to appreciate, there is an increased risk of more rate cuts.
AUD/USD initially benefited from the move higher in NZD/USD and rallied to 0.7760, but failed to sustain momentum and fell back to 0.77 ahead of the Shanghai open. AUD/NZD flows were also weighing on the currency. The pair declined from 1.0670 to 1.0540, and while it was able to bounce from there, it continues to trade with an offered tone.
The other major pairs were quiet. EUR/USD traded 1.1170-90 overnight, GBP/USD consolidated between 1.30 and 1.3030. Even the USD/JPY didn't move a lot as Japanese markets were closed for a holiday and stayed within a 101-101.50 range.
Upcoming Events:
• 07:45 BST – French CPI
• 09:00 BST – Italian CPI
• 13:30 BST – US Initial Jobless Claims
• 23:45 BST – New Zealand Retail Sales
