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The Kiwi continued its decline after a weak quarterly business survey, while a deal between Merkel and Seehofer gave the euro some reprieve.

  • NZIER business confidence drops from -11 to -20 in Q2 2018
  • Japan’s monetary base (y/y) up by 7.4% vs. 8.2% expected, 8.1% previous
  • AU building approvals dips by 3.2% after 5.6% decline in April
  • RBA keeps rates at 1.50% as expected

Major Events/Reports:

NZIER business confidence

A quarterly business report showed that business confidence had declined further in Q2 2018. 19% are expecting a deterioration of economic conditions, higher than last quarter’s 10% figure.

NZIER’s Quarterly Survey of Business Opinion (QSBO) showed that lower profitability and downbeat sentiment are beginning to impact future plans on hiring and investment. In fact, businesses are generally not expecting a recovery in profitability in the quarter ahead. Yipes!

New Zealand Finance Minister Robertson shrugged off the news, saying that there’s more to the economy than one survey, adding that there’s no strong correlation between business confidence and GDP growth.

RBA keeps policies steady in July

As expected, the Reserve Bank of Australia (RBA) kept its interest rates at 1.50% for another month in July.

The central bank still believes that recent data point to GDP growing “a bit above” 3.0% in 2018 and 2019, but that outlook for household consumption and “the direction of international trade policy in the United States” continue to pose risks.

The RBA has also acknowledged the Aussie’s decline, omitting the “[a]n appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast” part from June’s statement.

Instead, it now believes that “[t]he Australian dollar has depreciated a little, but remains within the range that it has been in over the past two years.”

Overall, Governor Lowe and his team think that a “low level of interest rates” is still appropriate since further progress in inflation and employment are expected to be gradual.

Continued trade war concerns

With no fresh catalyst to price in, Asian session traders continued to price in the uncertainty that would follow after the U.S. and China each implement tariffs on each other’s goods starting Friday.

The Chinese market took the heaviest hits after the People’s Bank of China (PBoC) went back to weakening the yuan after snapping an 8-day spree.

This time around the USD/CNY mid-point rate was fixed at 6.6497 against yesterday’s 6.6157 figure. The move prompted even more selling in the offshore markets and spotlighted concerns about the world’s second-largest economy.

  • Nikkei is down by 0.90% to 21,615.8
  • A SX 200 is up by 0.20% to 6,226.2
  • Hang Seng is down by 2.73% to 28,165.9
  • Shanghai index is down by 1.27% to 2,740.267

Gold prices also weakened on a bit of dollar strength, while crude oil prices shot higher after Libya declared force majeure on some of its supplies.

  • Gold is down by 0.26% to $1,238.53
  • Brent crude oil is up by 0.39% to $77.75
  • U.S. WTI is up by 0.66% to $74.53

Major Market Mover(s):

NZD

GDP correlation or not, Kiwi traders didn’t like seeing a significantly less optimistic quarterly business survey from New Zealand.

NZD/USD is down by 16 pips (-0.24%) to .6699
NZD/JPY is down by 22 pips (-0.29%) to 74.25
AUD/NZD is up by 29 pips (+0.26%) to 1.0954
GBP/NZD is up by 34 pips (+0.17%) to 1.9603
EUR/NZD is up by 32 pips (+0.18%) to 1.7363

CHF

There are no catalysts to drag the franc lower against most of its counterparts, though SNB intervention and a bit of risk appetite in the euro region after Merkel reached a deal with Seehofer might have factored in its weakness.

CHF/JPY is down by 16 pips (-0.14%) to 111.44
AUD/CHF is up by 9 pips (+0.12%) to .7299
USD/CHF is up by 11 pips (+0.11%) to .9946
EUR/CHF is up by 6 pips (+0.05%) to 1.1569

Watch Out For:

  • 6:45 am GMT: France’s government budget balance
  • 7:00 am GMT: Spain’s unemployment change (-101.0K expected, -83.7K previous)
  • 8:30 am GMT: U.K.’s construction PMI (52.6 expected, 52.5 previous)
  • 8:30 am GMT: BOE’s FPC meeting minutes
  • 9:00 am GMT: Euro Zone’s PPI to remain at 0.1%?