With not a lot of economic data on the docket, Asian session forex traders tuned in to central banker speeches today.
- NZ trade surplus widens from 74M NZD to 242M NZD in June
- Japan’s services PPI (y/y) retains 0.8% growth as expected
- AU CPI slips from 0.5% to 0.2% vs. 0.4% uptick in Q2 2017
- AU annualized CPI dips from 2.1% to 1.9% in Q2 2017
- RBA’s trimmed mean CPI (y/y) up by 1.8% as expected vs. 1.9% previous
- RBA’s trimmed mean CPI (q/q) remains at 0.5% as expected
New Zealand’s trade surplus widens
Data printed earlier today showed New Zealand’s trade surplus widening to 242 million NZD in June, which represents the fourth straight month of surplus after eight months of deficit. Analysts had expected a 100M NZD surplus after May’s 74M surplus reading.
Details of the report show that exports had gone up by 10.7% from a year ago in June, which is higher than May’s downwardly revised 7.9% growth and marks the fastest uptick so far this year. Milk powder, butter, and cheese dominated the rise in exports in both quantities and values.
Imports also continued to grow, this time by 7.7% against May’s 14.9% increase. Like in most countries, lower oil prices contributed to the decrease in imports.
Australia’s CPI miss
The Aussie took hits during the Asian session after Australia’s inflation report missed market expectations.
Australia’s CPI only grew by 0.2% on a quarterly basis, which is lower than Q1 2017’s 0.5% growth and the expected 0.4% uptick. This translates to an annualized growth of 1.9%, which is weaker than the previous quarter’s 2.1% gain.
Meanwhile, the RBA’s closely-watched trimmed mean CPI clocked in at 1.8% from a year earlier, which is still around market expectations but is lower than Q1 2017’s 1.9% growth. Its quarterly reading also came in as expected with its 0.5% increase.
A closer look tells us that price increases in medical and hospital services (+4.1%), tobacco (+1.0%), beer, (+1.0%), and new dwelling purchased by owner-occupiers (+0.9%) were mostly offset by dips in domestic holiday travel & accommodation (-3.2%), fruit (-4.4%) and automotive fuel (-2.5%).
The most interesting bit about the report is the trimmed mean CPI keeping its 0.5% growth only because of price increases in rent and dwelling purchase prices. Without it the core CPI growth would be much lower. Naturally, the lack of broad-based price growth encouraged Aussie bears to attack.
Central banker remarks
Today we had not one, not two, but THREE central bank officials who shared their two cents and affected their currencies one way or another.
BOJ Deputy Governor Hiroshi Nakaso
In a speech to business leaders in Hiroshima, the BOJ Deputy Governor said that he doesn’t see any need to further ease the central bank’s policies because the “upward momentum in prices is intact.”
He also recognized that businesses have streamlined their operations to avoid passing labor costs to customers, but that it raises productivity in the long-run and that there are still signs that companies will raise prices in the future.
Nakaso also threw his support for more ETF purchases but said that it’s “something that we debate and decide on at each policy meeting.”
RBA Governor Philip Lowe
The RBA head honcho spent some time talking about the labour markets and wages in today’s speech in Sydney.
He expressed cautious optimism, saying that “forward-looking indicators suggest that employment growth will continue” and that it’s likely that “wage growth picks up gradually as the demand for labour strengthens.”
What market players paid more attention to was his lack of concerns over the other central banks’ tightening biases. He shared that “Just as we did not move in lockstep with other central banks when the monetary stimulus was being delivered, we don’t need to move in lockstep as some of this stimulus is removed.”
Lowe also shrugged off inflation concerns by saying that the RBA has “not sought to stimulate a rapid lift in inflation” because the labour market’s job generation “has allowed us to be patient.”
Last but not the least was his attempt at jawboning when he said that it would be helpful if the Australian dollar was “a bit lower” than its current levels.
RBNZ Assistant Governor John McDermott
RBNZ’s Assistant Governor and Head of Economics John McDermott killed rate hike expectations by saying that “a neutral rate of around 3.5% implies that monetary policy is stimulatory at present, given an official cash rate of 1.75%,” though it won’t be as stimulatory as if neutral rates were assumed at 4.0% as it way two years ago.
Basically, he highlighted that the RBNZ now expects a lower “neutral interest rate,” so its current 1.75% interest rate won’t have the same impact as it would have years ago.
He also tried his hand at jawboning the Kiwi by saying that a weaker currency “would help rebalance economic growth towards the tradeables sector.”
Major Market Mover(s):
The Aussie took hits from its major counterparts after Australia printed a weaker-than-expected CPI report.
AUD/USD is down by 31 pips (-0.39%) to .7906, AUD/JPY fell by 35 pips (-0.39%) to 88.46, and AUD/NZD is down by 65 pips (-0.61%) to 1.0642.
The Greenback continued to edge higher against its higher-yielding counterparts ahead of the FOMC statement scheduled later today. Of course, it also doesn’t hurt that U.S. equities had a good day and that the GOP (narrowly) passed the Obamacare repeal bill up for debate.
GBP/USD is down by 8 pips (-0.06%) to 1.3022, USD/CHF is up by 7 pips (+0.07%) to .9527, and USD/CAD is up by 4 pips (+0.03%) to 1.2508.
Watch Out For:
- 6:00 am GMT: Switzerland’s UBS consumption indicator
- 8:30 am GMT: U.K. preliminary GDP (q/q) (0.3% expected, 0.2% previous)
- 8:30 am GMT: U.K. BBA mortgage approvals (39.9K expected, 40.3K previous)
- 8:30 am GMT: U.K. services index (0.4% expected, 0.2% previous)