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Major currencies were all over the place as forex traders priced in mixed risk sentiment ahead of a potentially volatile week.

  • NZ’s Q2 2017 CPI down to 0.0% vs. 0.2% expected, 1.0% previous
  • AU new motor vehicle sales up by 1.2% vs. 3.1% uptick in May
  • RBA prints upbeat meeting minutes but doesn’t hint at a rate hike
  • 2 more U.S. Republican Senators announce opposition to replace Obamacare

Major Events/Reports:

New Zealand’s CPI miss

Kiwi bears started the session strong after New Zealand’s Q2 2017 inflation numbers missed analysts’ expectations. Consumer prices were flat in the June quarter, which translates to an annualized growth of 1.7%.

Details tell us that higher vegetable prices pushed food prices higher by 0.7% while new housing purchases helped boost housing and household to a 0.8% growth. Unfortunately, transport prices fell by 1.3% with domestic airfares dropping by a whopping 15%.

The disappointment came at the heels of misses in New Zealand’s PMI reports. And, with the CFTC COT report showing overbought conditions for the Kiwi, today’s CPI miss made it easy for the Kiwi bears to attack.

Upbeat RBA meeting minutes

Members of the Reserve Bank of Australia (RBA) might have chosen to keep their rates steady in July, but that didn’t stop them from recognizing improvements in the economy!

In the meeting minutes released earlier today, the central bankers nodded to the strength of the labour market that “removed some of the downside risks” in the wage growth forecasts. They noted that the pick-up in employment growth should support household income growth (and therefore consumption growth) “in the period ahead.”

The RBA also noted the improvements in the global economy, saying that output “had been a little stronger than expected” with some central banks already on the tightening path.

Another notable bit is the mention of fiscal stimulus. After noting that “fiscal policy would be more expansionary in 2017/18 than had previously been expected,” RBA members shared that infrastructure investment is now expected to have “significant positive spillovers to other parts of the economy.

There’s also mention of a “neutral nominal cash rate,” which the RBA reveals is at around 3.5% given that inflation expectations is at around 2.5%. The central bank qualified, however, that there’s still “significant uncertainty around this estimate.”

On housing, the RBA remarked that it’s still too early for the measures announced by Australian Prudential Regulation Authority (APRA) “to have had their full effect.”

As optimistic as the central bank was, though, it still doesn’t look like it’s ready for a rate hike anytime soon.

See, not only did the members note that “there were still risks to consumption growth should household income growth remain subdued, particularly given the high levels of household debt,” but they also remained firm that “developments in the labour and housing markets continued to warrant careful monitoring” given their growth and inflation outlook.

GOP’s plan to replace Obamacare loses more support

The dollar was sucker-punched in late Asian session trading when Senators Jerry Moran (R-Ks ) and Mike Lee (R-Utah) announced that they would NOT support their party’s Obamacare replacement plan as written.

This marks the third and fourth GOP members to reject the replacement, and mathematically makes it improbably for the party to replace Obamacare.

Senate Majority Leader Mitch McConnell has now announced that the Senate will vote to repeal Obamacare without a replacement “in the coming days.”

The loss of support now makes it harder for the Trump administration to draft its tax reform and provide fiscal stimulus for the economy. Naturally, the dollar took hits across the board.

Oil, which is priced in dollars, gained ground with Brent crude oil rising by 0.3% to $48.57 and U.S. oil prices rising by 0.3% to $46.15. Meanwhile, safe-haven gold gained 0.24% to 1,236.68.

The Asian bourses didn’t appreciate the uncertainty, however.

  • Nikkei is down by 0.64% to 19,996.56
  • Australia’s A SX 200 is down by 1.12% to 5,691.20
  • Hang Seng is down by 0.09% to 26,445.50 and
  • Shanghai index is down by 1.02% to 11,651.09

Major Market Mover(s):

USD

The Greenback was the biggest loser in the currency playground after the GOP officially lost enough votes to replace Obamacare.

EUR/USD jumped by 45 pips (+0.39%) to 1.1528, USD/JPY fell by 41 pips (-0.36%) to 112.16, GBP/USD popped up by 37 pips (+0.28%) to 1.3093.

NZD

Kiwi lost against its major counterparts as soon as New Zealand printed its weak inflation reports, but soon regained its footing after a broad dollar weakness pushed higher-yielding currencies higher.

NZD/USD dipped to a session low of .7260 before rising back up to .7331 while NZD/JPY fell to 81.69 before recovering to 82.21.

Watch Out For:

  • 8:30 am GMT: U.K. CPI (y/y) expected to remain at 2.9%
  • 8:30 am GMT: U.K. core CPI (y/y) expected to remain at 2.6%
  • 8:30 am GMT: U.K. PPI input (-0.8% expected, -1.3% previous)
  • 8:30 am GMT: U.K. PPI output expected to remain at 0.1%
  • 8:30 am GMT: U.K. retail price index (3.6% expected, 3.7% previous)
  • 8:30 am GMT: U.K. house price index (3.0% expected, 5.6% previous)
  • 9:00 am GMT: Germany’s ZEW economic sentiment (17.8 expected, 18.6 previous)
  • 9:00 am GMT: Germany’s ZEW economic sentiment (17.8 expected, 18.6 previous)