Article Highlights

  • New Zealand’s GDP slips from 0.8% to 0.4% in Q4 2016 vs. 0.7% growth expected
  • PBoC raised its short-term interest rates
  • AU MI inflation expectations dips from 4.1% to 4.0% in February
  • AU unemployment rate jumps from 5.7% to 5.9%
  • AU employment change clocks in at -6.4K vs. 16.3K addition expected, 13.5K previous
  • BOJ keeps monetary policies steady as expected
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It was a busy trading session for forex traders, as a couple of tier 1 economic events and reports pushed major currencies all over the charts. Here’s what you need to know!

Major Events:

New Zealand’s GDP – New Zealand’s economy expanded by 0.4% in the last three months of 2016, which is half of the downwardly revised 0.8% growth in Q3 2016 and is below the expected 0.7% uptick for the quarter.

Services – the main GDP driver – gained 0.7% over the period (down from 1.1% in Q3) while the manufacturing (-1.6%) and agriculture (-0.6%) industries saw contractions. Other notable factors include a 0.4% uptick in household consumption expenditure and a 0.7% gain in fixed asset investments. Meanwhile, exports dipped by 3.8% while imports gained 1.9% in Q4 2016.

Today’s release marks the slowest GDP expansion in six quarters but still translates to a 3.1% gain for the year ended December 2016 compared to 2015’s 2.5% growth.

PBOc raises interest rates – The People’s Bank of China (PBoC) got busy today, just a day after Fed’s rate hike and the annual session of the parliament where leaders prioritized discussions of fighting risks from a rapid build-up.

The central bank raised its 7-day, 14-day, and 28-day rates by 10 basis points to 2.45%, 2.60%, and 2.75%, respectively. Rates on medium-term lending facility (MLF) loans were also raised to 3.05% and 3.20%, respectively.

The PBOC also said it had lent 113.5B CNY of 6-month MLF loans and 189.5B CNY worth of one-year MLF loans to 17 financial institutions on Thursday. For newbies out there, you should know that MLFs are basically the PBoC’s medium-term loans to banks.

Last but not the least, the central bank strengthened the yuan against the U.S. dollar by bringing the USD/CNY mid-point lower from 6.9115 to 6.8862.

The central bank had already raised its shorter-term rates a few weeks ago. But the PBoC downplayed today’s moves, saying that the rates “do not indicate a change in direction for monetary policy” because they mostly reflect adjustments to both domestic and international supply and demand. Not really surprising since the Fed’s recent rate hike would encourage even more capital outflow from China’s yield-seekers.

Australia’s jobs numbers – Surprise, surprise! Employment data from the Land Down Under surprised to the downside as it reflected higher unemployment rate and net job losses for the month of February.

Data printed earlier today saw Australia’s unemployment rate shooting up from 5.7% to 5.9% when analysts had expected it to remain at 5.7%. That’s the highest jobless rate since January 2016, yo!

The increase in unemployment rate is particularly troubling if you consider that labor force participation rate had held steady at 64.6% for the month. That means that the increase in jobless rate is due to workers losing their jobs and not because more people were encouraged to enter the labor force.

And as if those numbers weren’t grim enough, the you should know that Australia also reflected a net job LOSS of 6,400 for the month. For comparison, analysts had expected a 16,300 net increase after seeing a 13,500 uptick last month. Talk about disappointing!

Apparently, a net of 33,500 part-time workers had lost their jobs, while a net of 27,100 workers had found full-time positions for the month. This is good news to the Reserve Bank of Australia (RBA), who is worried about the latest trends in the quality (part-time vs. full-time) of job creation and its impact on consumer spending patterns.

BOJ keeps rates steady – As expected, the Bank of Japan (BOJ) kept its current policies steady for another month.

Its interest rates remain at -0.1% while the central bank will continue to target a 10-year JGB yield of “around zero percent.”

The pace of bond purchases is also maintained at about 80T JPY per year while exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) purchases remain at 6T and 90B JPY, respectively. Meanwhile, outstanding amounts of CP and corporate bonds are also maintained at 2.2T and 3.2T JPY, respectively.

Overall, it seems like the BOJ is willing to continue pushing the pedal to the metal even as consumer prices have improved. Market players will tune in at 6:30 am GMT for BOJ head honcho Kuroda’s presser to see if he will hint at possible tapering in the foreseeable future.

Market Movers:

AUD – A surprise miss in Australia’s jobs report dragged the currency lower against its major counterparts.

AUD/USD slipped by 29 pips (-0.38%) to .7680, AUD/JPY is down by 16 pips (-0.18%) to 87.12, and EUR/AUD jumped 69 pips (+0.50%) to 1.3959.

NZD – A downside surprise in New Zealand’s Q4 2016 and a downward revision to its Q3 GDP figures weighed on the New Zealand dollar for most of the session.

NZD/USD is down by 42 pips (-0.60%) to .6996, NZD/JPY is down by 33 pips (-0.41%) to 79.36, and AUD/NZD is up by 28 pips (+0.26%) to 1.0979.

Watch Out For:

  • Tentative: BOJ press conference
  • 8:30 am GMT: SNB to print its monetary policy statement (read Forex Gump’s trading guide here!)
  • 10:00 am GMT: Euro Zone’s final CPI (y/y) expected to remain at 0.2%
  • 10:00 am GMT: Euro Zone’s final core CPI (y/y) expected to remain at 0.9%
  • 12:00 pm GMT: U.K.’s monetary policy decision. Watch out for any remarks about the Brexit process and its potential impact on the economy!

See also:

U.S. Session Recap
London Session Recap

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Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!