Kiwi’s price action was all about risk sentiment last week. Will it continue to dictate the comdoll’s price action this week?
RBNZ financial stability report (May 29, 9:00 pm GMT)
Though the Reserve Bank of New Zealand’s (RBNZ) last bi-annual report didn’t really produce wild intraday moves, it did inspire a bit of profit-taking and served as confirmation for the comdoll’s intraweek trends.
This time around market players will look out for any clues that might put pressure on the RBNZ to raise its rates.
For newbies out there, you should know that, between Governor Orr’s interviews, RBNZ’s new mandate, and recent RBNZ statements, it sounded like the central bank is happy to keep its rates lower for longer.
Overall risk sentiment
With no other major report scheduled from New Zealand, it’s likely that the high-yielding currency will once again take cues from risk-takers.
Aside from headlines involving the U.S.-China trade war, or U.S.-North Korea meeting, keep your eyes peeled for updates on Brexit, Italy’s political situation, and a possible vote of no confidence on Spanish PM Rajoy.
Last Week’s Price Review
The Kiwi is mixed for the week (as of 7:00 am GMT), which is a repeat of last week’s performance. Unlike last week, however, the Kiwi is currently on course to closing out the week as a net winner, which would put an end to five consecutive weeks of net losses for the Kiwi. That’s not yet set in stone, though, since the Kiwi is only barely winning out against the Greenback.
The Kiwi’s price action looks even more chaotic than that of the Aussie’s price action. However, we do get a clearer view if we simply remove AUD/NZD and NZD/CAD from the overlay.
As you can see, the Kiwi had a promising start. And as noted in Monday’s London session recap, that was likely due to the prevalence of risk appetite at the time.
Risk sentiment soured during Tuesday’s Asian session, so the Kiwi’s rally stalled. Risk-taking got revived during the Tuesday’s London session, though, so the Kiwi got bid higher again.
Strangely enough, however, the Kiwi later encountered fresh sellers even as risk-taking prevailed in Europe and despite the goods news that the E.U. had agreed to start trade talks with Australia and New Zealand.
There were no negative catalysts for the Kiwi at the time, so I noted in Tuesday’s London session recap that the Kiwi may have lost its yield advantage because of the rising bond yields at the time. It’s also possible that prospects of stronger growth in Germany and the Euro Zone as a whole because of China’s announcement that it would slash tariffs on imported cars may have also convinced traders to abandon the Kiwi in favor of the euro.
In any case, the Kiwi’s weakness began to make more sense again when risk aversion returned during Tuesday’s U.S. session.
Risk aversion was also the dominant sentiment during Wednesday’s Asian session, so the higher-yielding Kiwi got another beating. And while risk aversion also prevailed during Wednesday’s London session, the Kiwi was able to recover against the euro and the pound, but that was due to weakness on the part of the pound and the euro.
The Greenback also started to weaken across the board in the wake of the FOMC minutes and it’s very likely that the Kiwi was feeding off the Greenback’s weakness since risk aversion returned on Thursday but the Kiwi only grudgingly weakened against some of its rivals.