Asian Session Forex Recap – Oct. 18, 2016

  • RBA’s Lowe: Interest rates already very low
  • RBA waiting for CPI report to update assessment
  • New Zealand’s inflation climbs by 0.2% in Q3 2016 vs. 0.0% expected, 0.4% previous
  • AU new motor vehicle sales up by 2.5% vs. 0.0% growth in August

A bit of profit-taking and a couple of better-than-expected economic releases dragged the dollar lower across the board.

Major Events:

RBA meeting minutes – In its first meeting since Glenn Stevens stepped down as its head honcho, the Reserve Bank of Australia (RBA) had decided to keep its rates steady at 1.50%.

The meeting minutes reflected the members’ belief that growth in China has stabilized while demand for commodities remain resilient. On the domestic front, momentum in the labor market remains uncertain; housing market conditions remain mixed, and a low exchange rate has been helping the trading sector. Overall, the economy seems to be adjusting pretty well to the end of the mining boom and recent data are consistent with the RBA’s August forecasts.

The key takeaway from the release is that members are waiting for the CPI release to update their economic projections. According to the RBA, “This would provide an opportunity to consider the economic outlook, assess the effects of previous reductions in the cash rate and review conditions in the labour and housing markets.” A weaker-than-expected CPI will likely prompt the RBA to cut its rates further, as it had done in the last two report releases.

New Zealand’s CPI – Speaking of inflation, New Zealand just published its consumer prices for Q3 2016. Numbers show a 0.2% uptick for the quarter following a 0.4% growth in Q2 2016 and estimates of a 0.0% growth. Meanwhile, the year-on-year pace clocked in at 0.2% against 0.1% growth estimates.

Purchase of newly-built houses and other housing-related prices provided the biggest boost for the report, while declines in petrol prices and other transportation costs dragged the overall basket of consumer prices.

Many were expecting weak readings following the RBNZ’s threats of further rate cuts, so the better-than-expected CPI release was a welcome surprise for the bulls.

More fuel for oil rallies – Oil traders got busy during the Asian session after some analysts shared that the oil market may not be oversupplied as previously thought. Bernstein Energy noted that recent inventory declines “suggest that oil markets may be closer to re-balancing than some expect” especially ahead of the winter months that’s expected to raise oil demand.

Brent crude oil is up by 0.64% to $51.85 while U.S. crude oil prices also ticked 0.62% higher to $50.26.

Major Market Movers:

AUD – The Aussie was king of pips during the Asian session after the RBA’s meeting minutes painted a not-so-dovish picture.

AUD/USD shot up by 46 pips (+0.60%) to .7670, AUD/JPY is up by 42 pips (+0.53%) to 79.63, and EUR/AUD is down by 63 pips (-0.44%) to 1.4370.

NZD –The New Zealand dollar also had a good day following the release of the better-than-expected CPI for Q3 2016.

NZD/USD popped up by 56 pips (+0.79%) to .7187, NZD/JPY also shot up by 53 pips (+0.72%) to 74.62, and AUD/NZD ended the session 19 pips lower (-0.18%) at 1.0673 after hitting a low of 1.0622.

USD – Risk appetite and some doubts over the Fed’s interest rate hike schedule dragged the Greenback lower across the board.

EUR/USD is up by 17 pips (+0.15%) to 1.1021, GBP/USD is up by 35 pips (+0.29%) to 1.2224, and USD/JPY slipped by 6 pips (-0.06%) to 103.82 after hitting bottom at 103.68.

Watch Out For:

  • 8:30 am GMT: U.K. CPI (y/y) (0.9% expected, 0.6% previous)
  • 8:30 am GMT: U.K. core CPI (1.4% expected, 1.3% previous)
  • 8:30 am GMT: U.K. PPI input (0.4% expected, 0.2% previous)
  • 8:30 am GMT: U.K. PPI output (0.2% expected, 0.1% previous)

See also:

U.S. Session Recap
London Session Recap

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