U.S. Session Forex Recap – June 11, 2015

  • RBNZ cuts its rates from 3.50% to 3.25%
  • RBNZ says NZD remains overvalued, further easing needed if data is weak
  • UK NIESR GDP estimate: 0.6% vs. 0.5% previous
  • US budget balance: -82.4B USD vs. -97.4B USD expected, 156.7B USD previous
  • No monetary policy-related remarks from BOE’s Carney
  • S&P lowers Greece’s credit rating from CCC+ to CCC
  • UK RICS house price balance: 34% vs. 35% expected, 32% previous
  • Commodities, bond yields, high-yielding currencies up during the session
  • AU employment numbers, China’s industrial production report on tap

Just when we thought that the yen’s moves were the highlight of yesterday’s forex price action, the RBNZ surprised the markets and shook things up.

The biggest story of the hour was the RBNZ’s decision to cut its interest rates, a first since 2011. The central bank cut 3.50% rates down to 3.25%, pointing to the growth concerns and overvalued Kiwi as their reason for the decision.

While some analysts like Forex Gump had already seen an RBNZ rate cut coming, many market players didn’t expect the central bank’s dovishness. For starters, the RBNZ cut its 2016 growth forecasts from 3.8% to 3.3%. Not only that, but Wheeler and his gang also hinted that they could further cut its rates if growth numbers continue to underperform.

The cherry on top of the Kiwi bears’ forex sundae was the RBNZ saying that a significant downward adjustment in the Kiwi’s current levels would be justified. Talk about a triple roundhouse kick to the gut!

Not surprisingly, the Kiwi fell across the board. NZD/USD dropped by a whopping 124 pips (-1.72%) to .7071 at the report’s release while NZD/JPY plunged by 152 pips (-1.72%) in the same hour.

Before the RBNZ brouhaha though, it was actually the dollar that caught some investor attention. The low-yielding currency gained back some of the pips it lost in early London trading. USD/JPY found support at the 122.50 area before closing at 122.62 while USD/CHF inched 15 pips higher (+0.16%) to .9311. Meanwhile, EUR/USD steadied at the 1.1300 area and GBP/USD only rose by 51 pips (+0.33%) to 1.5538.

Even the comdolls found it difficult to gain against the dollar. Both gold and oil prices ticked significantly higher but AUD/USD only gained 16 pips (+0.21%) to .7761 and USD/CAD even inched 14 pips higher (+0.11%) to 1.2262.

Which forex theme/s would dominate today’s price action? At 12:30 am GMT Australia is scheduled to print its employment numbers. Market players are expecting the unemployment rate to remain at 6.2% while 15,000 workers are expected to find jobs (compared to last month’s 2,900 decline). A significantly lower reading could fuel the comdoll’s losses especially at the heels of weak trade data from China and the RBNZ’s somewhat surprising move to cut its rates.

Keep your eyes glued to the tube for these potential market movers!

See also:

London Session Recap

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

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