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Kiwi was king of pips during the Asian session, as a strong CPI reading brought the bulls to its yard.

The Aussie also caught some of the bullish move, while the low-yielding yen took more hits amidst an overall risk-friendly trading environment.

  • New Zealand quarterly CPI at 0.4% vs. 0.5% expected, 0.5% previous
  • NZD shoots up as RBNZ’s preferred inflation measure inches higher
  • RBA: household balance sheets warrant “close and careful monitoring”

Major Events/Reports:

New Zealand’s CPI surprise

Data printed earlier today saw consumer prices rising by 0.4% in Q2 2018, which is a tad lower than the expected 0.5% bump.

On an annualized basis, prices had risen by 1.5%, higher than Q1’s 1.1% reading but is the second lowest in the last six quarters. Alcoholic beverages and tobacco led the price increases, while household contents and services as well as clothing & footwear costs declined for fourth and third consecutive quarters respectively.

Instead of focusing on headline numbers, however, analysts were quick to point out that the sectoral factor model showed a 1.7% annualized increase in Q2 after rising by 1.6% in Q1.

The sectoral factor model is the Reserve Bank of New Zealand’s (RBNZ) preferred core inflation gauge, as it excludes GST and separates CPI components into tradable and non-tradable sectors.

RBA concerned about household debts

When the Reserve Bank of Australia (RBA) printed its statement earlier this month analysts had fixated on the fact that the central bank had stopped jawboning its weakened currency.

Turns out, Governor Lowe and his team have their sights set on another issue: household debt.

In its meeting minutes the RBA noted that “high levels of household debt could affect economic outcomes” especially for Australia where “a material share of household debt is held by lower-income households, which generally have higher debt relative to their income.

At the end of the day, RBA members agreed that household debts warrant “close and careful monitoring,” and that slow household income relative to household debt levels make consumption a “source of uncertainty” in making GDP forecasts. Yipes!

Mixed risk sentiment

No data? No changes! Today’s price action was mostly a repeat of yesterday’s trading, with Nikkei rising on the back of a lower yen.

Meanwhile, soft Chinese data and a bit of profit-taking ahead of Powell’s likely hawkish testimony weighed on the other bourses.

  • Nikkei is up by 0.83% to 22,784.3
  • A SX 200 is down by 0.28% to 6,219.2
  • Hang Seng is down by 1.00% to $28,254.8
  • Shanghai index is down by 1.01% to 2,785.745

Gold received some support as the dollar retreated ahead of Powell’s testimony. Meanwhile, oil prices recovered some of their losses after yesterday’s headlines pointed to more oil supply down the road.

  • Gold is up by 0.06% to $1,241.51
  • Brent crude oil is up by 0.52% to $72.16
  • U.S. WTI is up by 0.29% to $68.07

Major Market Mover(s):

NZD

New Zealand’s faster price increase was the milkshake that brought the bulls to the Kiwi’s yard.

NZD/USD is up by 60 pips (+0.88%) to .6836; NZD/JPY is up by 72 pips (+0.95%) to 76.80, and NZD/CHF is up by 57 pips (+0.84%) to .6810.

The high-yielding comdoll also showed strength against the European currencies and its fellow comdolls.

EUR/NZD is down by 139 pips (-0.80%) to 1.7141; GBP/NZD is down by 148 pips (-0.76%) to 1.9379; NZD/CAD is up by 66 pips (+0.74%) to .8967 and AUD/NZD is down by 71 pips (-0.65%) to 1.0876.

AUD

The Aussie shrugged off a cautious RBA meeting minutes as it caught some of the risk-friendly vibe in the markets.

AUD/USD is up by 17 pips (+0.22%) to .7436; AUD/JPY is up by 23 pips (+0.27%) to 83.53; AUD/CHF is up by 13 pips (+0.17%) to .7407, and EUR/AUD is down by 22 pips (-0.14%) to 1.5759.

JPY

The yen continued to lose pips against its major counterparts thanks to a bit of risk-taking during the trading session.

USD/JPY is up by 7 pips (+0.06%) to 112.34; CAD/JPY is up by 18 pips (+0.21%) to 85.64; EUR/JPY is up by 15 pips (+0.11%) to 131.65, and GBP/JPY is up by 24 pips (+0.16%) to 148.83.

Watch Out For:

  • 9:00 am GMT: BOE’s Mark Carney to testify in Hampshire
  • 9:30 am GMT: U.K.’s employment data. Read our mini trading guide if you’re trading the event!