With not a lot of economic data on the docket, Asian session forex traders tuned in to central banker speeches today.
The Aussie fell sharply on dovish comments by the RBA’s second top boss, while Kiwi popped up on positive comments from New Zealand’s Finance Minister.
- NZ visitor arrivals jumps by 5.1% in June vs. 1.4% decline in May
- NZ credit card spending (y/y) up by 8.3% vs. 7.6% increase in May
- RBA Deputy Governor Debelle: “Neutral rate” has no bearing on policy direction
- NZ Finance Minister Steven Joyce: Businesses performing very well at current NZD levels
RBA’s Debelle weighs on AUD
In a speech to the Committee for Economic Development of Australia, RBA Deputy Governor Guy Debelle basically shot down interest rate hike expectations.
For starters, he emphasized that the RBA isn’t feeling any pressure from interest rate hikes made by the other major central banks, saying that:
“Just as the policy rate in Australia did not need to decline to the very low levels seen in other parts of the world, the fact that other central banks increase their policy rates does not automatically mean that the policy rate here needs to increase.”
He also added that:
“While global influences, including monetary policy settings in other economies, have a significant impact on that assessment, they are, in the end, only one of a number of considerations to be taken into account.”
He then downplayed the benefits of stronger global growth prospects, sharing that while it’s good for the Australian economy, the easy policies implemented by their counterparts have led to a higher exchange rate, which blunts some of the impact of stronger global growth:
“While an easier monetary policy elsewhere in the world should lead to faster growth in the world economy, which is good for the Australian economy, an appreciating exchange rate works against this.”
Finally, Debelle literally told market players not to get excited over discussions of a “neutral interest rate.”
He said that “No significance should be read into the fact the neutral rate was discussed at this particular meeting.” If you recall, the Aussie shot higher earlier this week when talks of a neutral interest rate prompted rate hike speculations.
NZ FinMin is cool with current NZD levels
New Zealand Finance Minister Steven Joyce made his own headlines today when he hinted that he’s cool with NZD’s current levels.
In a Bloomberg interview in Wellington, Joyce refrained from naming specific levels for the Kiwi, but shared his belief that the strong currency reflects New Zealand’s strong economy. More importantly, he said:
“I am just saying that the New Zealand economy and New Zealand businesses are performing very well at these current levels.”
Joyce’s lack of concern over what market players thought were relatively overbought levels boosted the Kiwi even higher against its major counterparts.
Major Market Mover(s):
A relatively uneventful trading session and a dovish speech by an RBA official spelled trouble for the Aussie bulls during the Asian session.
AUD/JPY is down by 80 pips (-0.90%) to 88.24, AUD/USD is down by 73 pips (-0.92%) to .7883, and AUD/NZD is down by a whopping 110 pips (-1.02%) to 1.0631.
NZD/USD is up by 8 pips (+0.11%) to .7415, NZD/JPY is up by 10 pips (+0.12%) to 83.01, and GBP/NZD is down by 27 pips (-0.15%) to 1.7489.
Watch Out For:
- U.K. government borrowing (4.3B GBP expected, 6.0B GBP previous)