A deterioration of risk sentiment dragged Kiwi lower across the board last week. Will this week’s catalysts turn the tides for the comdoll?
RBNZ’s policy decision (Aug 8, 9:00 pm GMT)
As widely expected, the Reserve Bank of New Zealand (RBNZ) kept its interest rates unchanged at 1.75% in June. What market geeks hadn’t counted on was the central bank’s slightly dovish tone.
See, Governor Orr and his team noted that a “supportive” monetary policy will likely be needed “for some time to come.” Not only that, but it ended its statement by ensuring that “the OCR is at an expansionary level for a considerable period.”
Analysts still aren’t expecting changes from the RBNZ this week. However, a presser will be conducted an hour after the official statement is released. Will the central bank be less dovish after inflation shot higher in Q2?
Overall risk sentiment
As we can see from the chart below, the Kiwi takes cues from overall risk sentiment.
And now that China is planning to hit $60B worth of U.S. goods in retaliation for its latest tariff threats, the U.S.-China trade war drama is set to dominate market headlines.
And then there’s China’s top-tier releases like its trade and inflation data. Big hits or misses could move comdoll price action, make sure you stick around to soak up any volatility worth trading!
Last Week’s Price Review
The Kiwi may soon mark its second week of net losses since the Kiwi is currently the worst-performing currency of the week (as of 7:00 am GMT).
However, the Kiwi’s strength finally buckled when ANZ’s Business Confidence Report revealed that 44.9% of businesses expect business conditions in New Zealand to deteriorate in the year ahead. And not even the risk-friendly vibes during Tuesday’s morning London session was able to revive demand for the higher-yielding Kiwi.
The Kiwi continued to take ground from the yen at least. However, the Kiwi would also eventually lose out to the yen, thanks to trade-related jitters when Wall Street Journal released a report claiming that there had been little progress in trade talks between the U.S. and China and that “Some [of Trump’s advisers] are pushing the president to apply tariffs as high as 25% on $200 billion of Chinese imports, up from an original proposal for 10%.”
This was then followed up by a Bloomberg report which claimed that “The Trump administration will propose raising to 25 percent its planned tariffs on $200 billion in Chinese imports, ratcheting up pressure on Beijing to return to the negotiating table.”