Asian Session Forex Recap – July 18, 2016

  • NZ CPI up by 0.4% in Q2 2016 vs. 0.5% uptick expected, 0.2% increase in Q1 2016
  • NZ CPI (y/y) up by 0.4% vs. 0.5% increase expected
  • U.K. Rightmove house price index falls from 0.8% to -0.9%
  • Japan’s markets out on Marine Day holiday

Ho-hum. With no major economic reports on tap and Japan’s markets out on a holiday, forex trading turned out to be a mixed bag of beans.

Major Events:

New Zealand’s CPI – The plot just thickened for the Reserve Bank of New Zealand (RBNZ’s) rate cut drama! A report released earlier revealed that New Zealand’s consumer prices only grew by 0.4% in Q2 2016 and grew by the same rate compared to Q1 2016. The rate missed investor expectations all around.

What makes the weak inflation release interesting for forex traders is that it ups the odds of the RBNZ cutting its interest rates to 2.00% in August. If you recall, back in late May RBNZ Governor Wheeler already hinted that the next rate cut would depend on the Kiwi’s value, oil prices, and inflation expectations. Check, check, and check.

The only party pooper for the rate cut junkies is New Zealand’s home prices, which would become even more overheated in the event of a rate cut. Housing-related activities is already up by 3.3% in the year and is the biggest upward contributor to New Zealand’s CPI report.

Overall risk appetite – With not much data to process, forex traders turned to the failed coup attempt in Turkey. A successful attempt would’ve caused uncertainty (as it did last Friday) because of Turkey’s critical role in fighting against ISIS in Syria.

But the coup has failed over the weekend and traders are back to buying risk-friendly assets. The Nikkei is up by 0.68%, Hang Seng is up by 0.28%, Australia’s ASX is up by 0.56%, and the Shanghai index is up by 0.33%.

Major Market Movers:

NZD – Not surprisingly, the Kiwi bears pounced on New Zealand’s weaker-than-expected inflation release.

NZD/USD is down by 44 pips (-0.63%), NZD/JPY is down by 33 pips (-0.44%), and AUD/NZD is up by 67 pips (+0.63%).

USD – The dollar had a mixed trading session as it lost pips on its higher-yielding counterparts but gained a couple against its fellow low-yielders.

EUR/USD is up by 10 pips (+0.09%), GBP/USD is up by 31 pips (+0.24%), USD/CHF inched 2 pips higher (+0.02%), and USD/JPY popped up by 7 pips (+0.07%).

Watch Out For:

  • 9:15 am GMT: MPC member Weale to make a speech in London. Watch out for any hints on the BOE’s stimulus package in August!
  • 11:00 am GMT: German BundesBank monthly report

See more:

Check out Last Week’s Top Movers!

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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