U.S. Session Forex Recap – July 19, 2016

  • Canadian foreign securities purchases down from 15.52B CAD to 14.73B CAD
  • U.S. NAHB housing market index fell from 60 to 59
  • Australia CB leading index at 0.1% vs. 0.5% previous
  • New housing market measures from the RBNZ?
  • S&P 500 and Dow index close at record highs

Despite the lack of top-tier economic releases, the Greenback was able to rake in gains against some of its counterparts thanks to strong rallies in the U.S. equity market.

Major Events:

U.S. equity market rebound – The S&P 500 index closed at an all-time high of 2,166.89 buoyed by rallies in the tech and financial sectors while the DJIA also hit a new high of 18,533.05. Stronger than expected earnings data from the likes of Bank of America, Hasbro Inc., and Charles Schwab Corp. confirmed that U.S. businesses had a pretty good run in the second quarter of the year, easing fears of a potential slowdown.

RBNZ to tighten housing market lending? – It looks like the RBNZ is scrambling to get its act together as it recently proposed a batch of measures to tighten lending conditions in its overheating housing market. If you recall, the central bank has been reluctant to cut interest rates since policymakers fear that this might stoke a property bubble.

Over the weekend, New Zealand printed a weaker than expected CPI reading of 0.4% for Q2 versus the estimated 0.5% uptick in price levels. Prior to this, the central bank announced that they plan on giving an updated assessment of the economy by Thursday this week, spurring speculations that they might drop some easing hints.

The RBNZ plans on setting a new loan-to-value ratio (LVR) of 60% for rental property by September 1, which basically lowers the amount that potential buyers can borrow. This should give the central bank more flexibility to lower interest rates, similar to how they went about it in last year’s rate cut.

Major Currency Movers:

NZD – The Kiwi chalked up another round of losses upon hearing about the RBNZ’s proposal to tighten lending conditions in the housing market, setting the stage for a possible rate cut.

NZD/USD found resistance at the .7100 handle and is now down to .7035, NZD/JPY fell from the 75.50 area to a low of 74.45, EUR/NZD climbed past the 1.5700 mark, GBP/NZD broke above its 1.8700 consolidation to test 1.8800, and NZD/CAD resumed its drop from a high of .9243 to the .9135 level.

USD – The Greenback was off to a weak start against the European currencies but managed to regain its footing later on.

EUR/USD climbed to a high of 1.1085 before treading sideways, GBP/USD slowly edged to a high of 1.3315, USD/CHF hit a low of .9810 before recovering to .9830, and USD/JPY carried on with its climb to 106.35. AUD/USD consolidated around the .7600 handle before breaking sharply lower while USD/CAD popped up to a high of 1.3022 as oil prices weakened.

Watch Out For:

  • 1:30 am GMT: RBA monetary policy meeting minutes

See also:

Asian Session Recap

London Session Recap

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