There were no top-tier reports printed during the Asian session, so market players focused on the upcoming meeting between the U.S. and China.
- NZ PPI input prices up by 1.0% in Q1 2018 vs. 0.2% expected, 0.6% previous
- NZ PPI output prices up by 0.9% vs. 0.1% expected, 0.2% previous
- RBA Gov. Lowe: Board to “hold steady for a while yet”
- Lowe: Likely that next rate move “will be an increase, not a decrease”
- Lowe: “Moderate” depreciation in exchange rate would be “helpful”
- PBoC sets yuan midpoint peg higher after 6 days of devaluation
RBA Governor Lowe’s testimony
The only event scheduled for the day was Reserve Bank of Australia (RBA) Governor Philip Lowe giving a testimony before the House of Representatives’ Standing Committee on Economics.
In his speech he shared that interest rates will likely “hold steady for a while yet,” because “it is likely to be some time before we are at full employment and the inflation rate is comfortably within the target range on a sustained basis.”
Recall that the last time the RBA last changed its rates in August 2016 when it slashed its rates to 1.50%.
Lowe also highlighted uncertainties including global trade tensions; the possibility of a larger-than-expected pick-up in inflation in the U.S. that could lead to a faster-than-expected tightening from the Fed, and risks in economies like Argentina, Brazil, Turkey, and Italy that could increase stress in the global financial markets.
The RBA head honcho was optimistic over the labor market. However, he also believes that “the pick-up in wages growth is still expected to be fairly gradual.”
Last but not the least, Lowe communicated that a further “moderate” depreciation in the exchange rate would be “helpful” for Australia’s export-dependent economy.
Overall, the longer period of low interest rates and RBA’s preference for a weaker currency pulled the Aussie lower. Thankfully for the bulls, traders soon focused on overall risk appetite in the markets.
Cautious optimism and profit-taking
With not a lot of fresh data to price in, Asian session market players turned their focus on the upcoming meeting between U.S. and China’s trade representatives.
Of course, it also helped that the People’s Bank of China (PBoC) pegged its mid-point yuan valuation at 6.8896 per yuan, a tad lower than yesterday’s 6.8946 peg.
The PBoC’s move marked first time the central bank didn’t devalue its currency in days, and signaled the economic superpower’s confidence that we’ll see something productive from next week’s meetings.
- Nikkei is up by 0.49% to 22,301.5
- A SX 200 is up by 0.12% to 6,333.5
- Shanghai index is down by 0.39% to 2,694.517
- Hang Seng is up by 0.58% to 27,256.7
Commodities also showed mixed price action, with gold taking advantage of some dollar-selling while Brent crude oil inched higher on overall risk appetite.
- Gold is up by 0.21% to $1,176.70 per troy ounce
- Brent crude oil is up by 0.04% to $71.39 per barrel
- U.S. WTI is down by 0.05% to $65.41 per barrel
Major Market Mover(s):
AUD and NZD
Aussie traders shrugged off Philip Lowe’s somewhat bearish remarks in favor of pricing in a risk-friendly trading environment. Meanwhile, the fellow high-yielding New Zealand dollar received additional support from better-than-expected quarterly PPI input and output prices.
AUD/USD is up by 11 pips (+0.15%) to .7270; AUD/JPY is up by 11 pips (+0.13%) to 80.61; EUR/AUD is down by 11 pips (-0.07%) to 1.5656; GBP/AUD is down by 11 pips (-0.07%) to 1.7498, and AUD/NZD is up by 5 pips (+0.05%) to 1.1023.
NZD/USD is up by 9 pips (+0.13%) to .6595; NZD/JPY is up by 9 pips (+0.13%) to 73.12; NZD/CHF is up by 10 pips (+0.16%) to .6575, and EUR/NZD is down by 9 pips (-0.05%) to 1.7258.
Not surprisingly, low-yielding currencies like the dollar, yen, and franc took hits on overall risk appetite.
EUR/USD is up by 6 pips (+0.05%) to 1.1382; GBP/USD is up by 10 pips (+0.08%) to 1.2722, and USD/CAD is down by 9 pips (-0.06%) to 1.3147.
EUR/JPY is up by 4 pips (+0.03%) to 126.21; GPB/JPY is up by 12 pips (+0.08%) to 141.06, and CAD/JPY is up by 5 pips (+0.06%) to 84.33.
EUR/CHF is up by 7 pips (+0.06%) to 1.1347; AUD/CHF is up by 12 pips (+0.17%) to .7248; CAD/CHF is up by 7 pips (+0.09%) to .7283, and GBP/CHF is up by 11 pips (+0.09%) to 1.2683.
Watch Out For:
- 8:00 am GMT: Euro Zone current account (23.2B EUR expected, 22.4B EUR previous)
- 9:00 am GMT: Euro Zone final CPI (y/y) to remain at 2.1?
- 9:00 am GMT: Euro Zone final core CPI (y/y) expected to maintain 1.1% reading