The Kiwi already showed weakness from the get-go, thanks to the dovish RBNZ statement. However, the Kiwi got rushed by fresh sellers when RBNZ Chief Economist McDermott said some rather dovish things during the session.
The pound, meanwhile, finally caught a bid and was even the top-performing currency of the morning London session, apparently because of a Brexit-related rumor.
Other than those two, the safe-haven Swissy is also worth noting since it was the top-performing currency for most of the session before eventually succumbing to the advancing pound.
- Swiss jobless rate: steady at 2.6% as expected
- Japan’s preliminary machine tool orders (y/y): 13.0% vs. 11.4% previous
RBNZ’s McDermott speaks
RBNZ Assistant Governor and Chief Economist John McDermott was interviewed earlier during the session.
And, well, he had these rather dovish things to say:
“We’re putting a stake in the sand here and saying we expect growth to accelerate [in Q3].”
“[If there’s no acceleration] that means we’ve got something wrong and we’re going to have to reconsider where we’re at.”
“We’ve been pushed nearer to that trigger point [of a potential rate cut].”
“[A rate hike is] off the table for the foreseeable future.”
“You guys are starting to anticipate something that we don’t think is warranted.”
According to a report from Business Insider, E.U. leaders are supposedly ready and willing to offer concessions to British PM Theresa May “by allowing Britain to remain in the single market for goods while opting out of the free movement of people.”
However, the E.U. would also require the U.K. to reciprocate by also offering concessions, namely by following the E.U.’s “environmental, social, and customs rules.”
Interestingly enough, Business Insider was actually citing from a Times article that was released about 10 hours earlier. However, that rumor only made the rounds when Business Insider repeated it, probably because the Times requires you to pony up some cash for a subscription in order to read articles.
Risk-off vibes in Europe
The major European equity indices opened lower, recovered for a bit, then resumed their downhill trek, which is a sign that risk aversion was the dominant sentiment in Europe.
And market analysts say that Europe was plagued by risk aversion because of concerns relating to U.S. sanctions against Russia, which took a toll on European companies with decent exposure in that country.
Of course, jitters related to the escalating trade war between the U.S. and China were also cited as another reason for the risk-off vibes.
- The pan-European FTSEurofirst 300 was down by 0.41% to 1,520.70
- Germany’s DAX was down by 0.28% to 12,597.54
- The blue-chip Euro Stoxx 50 was down by 0.34% to 3,479.95
Major Market Mover(s):
The pound actually had a rough start. However, the pound jumped higher across the board when the Business Insider report made the rounds, probably because market players who were shorting the pound got spooked.
GBP/USD was up by 15 pips (+0.12%) to 1.2888, GBP/NZD was up by 59 pips (+0.31%) to 1.9366, GBP/CAD was up by 53 pips (+0.32%) to 1.6794
The Kiwi started the session on a weak footing, very likely because of the risk aversion in Europe and lingering disappointment because of the RBNZ’s more dovish stance.
Unfortunately for Kiwi bulls, risk aversion only intensified as the session progressed.
Worse, RBNZ Chief Economist McDermott was interviewed and he said some rather dovish things, which gave the Kiwi a noticeable bearish kick across the board.
NZD/USD was down by 14 pips (-0.21%) to 0.6648, NZD/JPY was down by 10 pips (-0.14%) to 73.87, NZD/CHF was down by 16 pips (-0.25%) to 0.6603
The safe-haven Swissy showed strength right from the start, likely because of the risk-off vibes in Europe. The pound did eventually outpace the Swissy, though. Still, second place ain’t too bad.
USD/CHF was down by 7 pips (-0.08%) to 0.9933, EUR/CHF was down by 19 pips (-0.17%) to 1.1513, CAD/CHF was down by 22 pips (-0.28%) to 0.7617
Watch Out For:
- 12:15 pm GMT: Canadian housing starts (220K expected vs. 248K previous)
- 12:30 pm GMT: Canada’s NHPI (0.1% expected vs. 0.0% previous)
- 12:30 pm GMT: Headline (0.2% expected vs. 0.3% previous) and core (0.2% expected vs. 0.3% previous) readings for U.S. PPI
- 12:30 pm GMT: U.S. initial jobless claims (220K expected vs. 218K previous)
- 2:00 pm GMT: U.S. final wholesale inventories (no change from 0.0% expected)
- 10:30 pm GMT: Business NZ manufacturing index (52.8 previous)