Asian session forex traders shrugged off the mixed vibes from the previous session and traded on a relatively upbeat trading environment despite a lack of catalysts.
- RBNZ keeps rates unchanged at 1.75% as expected
- NZ visitor arrivals dip by 3.0% vs. 3.8% increase in April
- NZ credit card spending (y/y) up by 7.6% vs. 6.5% uptick in April
RBNZ keeps rates steady as expected
As expected, the Reserve Bank of New Zealand (RBNZ) kept its interest rates unchanged at 1.75% for another month in June.What caught the investors’ attention was the central bank’s chill response to a strong Kiwi. If you recall, Governor Wheeler and his gang have always supported a weaker currency (I mean, who doesn’t?)
But in its statement, the RBNZ noted that NZD’s trade-weighted exchange rate has risen by 3% since May, and that “A lower New Zealand dollar would help rebalance the growth outlook towards the tradables sector.”
Since this is exactly what they also said last month when the TWI fell by 5%, analysts assumed that the RBNZ isn’t too worried about the Kiwi’s current levels.
Aside from not minding a strong currency, the RBNZ was also generally optimistic on the economy. See, even though growth was lower than expected in Q1 2017, the central bank still maintained its positive outlook.
An easy monetary policy, strong population growth, strong trade activities, and fiscal budget changes in 2017 are cited as reasons for the optimism.
Slow and steady risk appetite
With not a lot of catalysts on tap during the session, market players ended up taking profits from the previous session’s price action.
- Nikkei is up by 0.12% to 20,162.00
- Australia’s A SX 200 is up by 0.81% to 5,711.70
- Shanghai index is up by 1.58% to 11,371.10
- Hang Seng is up by 0.48% to 25,819.00
Major Market Mover(s):
With many market players expecting a bit of jawboning from the RBNZ, the relatively optimistic release sent the bulls out in the pip streets.
NZD/USD jumped to a session high of .7277 before trading at .7248, NZD/JPY popped up to 81.04 before settling down to 80.56, and AUD/NZD dropped to 1.0388 before levelling off to 1.0419.
Risk appetite remained well supported in general but dollar traders started questioning the Fed’s hawkishness, especially since bond prices and Uncle Sam’s data hardly support the optimism. This weighed on USD/JPY, which then weighed on the rest of the yen crosses.
USD/JPY is down by 19 pips (-0.17%) to 111.16, AUD/JPY is down by 22 pips (-0.26%) to 83.93, CHF/JPY is down by 19 pips (-0.17%) to 114.29, and EUR/JPY is down by 18 pips (-0.15%) to 123.14.
Watch Out For:
- 6:00 am GMT: Switzerland trade balance (2.44B CHF expected, 1.97B CHF previous)
- 8:00 am GMT: ECB economic bulletin
- 10:00 am GMT: U.K. CBI industrial order expectations