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New Zealand and Japan may have printed top-tier reports today, but Asian session traders were focused on Fed’s rate hike prospects and the upcoming elections.

  • NZ Q2 GDP clocks in at 0.8% as expected vs. 0.6% growth previous
  • NZ visitor arrivals slip by 0.3% vs. 5.3% decline in July
  • NZ credit card spending (y/y) jumps by 6.4% vs. 7.1% growth in July
  • BOJ keeps policies unchanged, one member dissents on -0.1% rate decision

Major Events/Reports:

New Zealand’s GDP release

Data printed earlier saw New Zealand’s economy growing by another 0.8% in Q2 2017 after accelerating by an upwardly revised 0.6% in the previous quarter.

Service-related industries dominated in the report, with retail trade and accommodation (+2.8%), transport, postal, and warehousing (+3.5%), and professional, scientific, technical, admin & support (+1.1%) leading the pack.

Manufacturing (+1.8%) also gained steam while construction showed improvement by declining by a slower pace of 1.1% against Q1’s 2.1% contraction.

Using the expenditure approach, we can see that exports (5.2%) gained the most with household consumption (+0.9%), fixed asset investment (+0.8%) following suit. Imports, meanwhile, gained 0.6% for the quarter.

Overall, the numbers support the RBNZ’s recent optimism that the economy will pick up in Q2 2017. Unfortunately, Kiwi bulls and bears were more focused (or concerned?) over the possible impact of New Zealand’s elections this weekend.

BOJ keeps policies unchanged in September

As expected, the Bank of Japan (BOJ) kept its policies unchanged for another month in September. In an 8-1 vote, central bank members decided to maintain their interest rates at -0.1% on excess reserves financial institutions keep at the BOJ.

Meanwhile, Kuroda and his team unanimously decided to continue aiming for a “near zero” yield for 10-year government bonds and keep their JGB purchases at an annual rate of 80 trillion JPY.

What caught market players by surprise was newcomer Goshi Kataoka dissenting. Recall that banker Hitoshi Suzuki and economist Goshi Kataoka replaced board members (and regular dissenters) Takahide Kiuchi and Takehiro Sato in July. Kataoka and Suzuki’s support for Kuroda’s policy direction is noted, so market players had plotted a dovish road for the BOJ.

Guess Kataoka wants to step up his game! Apparently, he believes that “Given excess supply capacity remaining in the capital stock and labour market, monetary easing effects gained from the current yield curve aren’t enough” to push inflation to the bank’s 2.0% target by 2019.

While he didn’t flat out call for lower rates, Kataoka did suggest that inflation will unlikely accelerate toward 2.0% next year, and that further easing steps are needed to push consumer prices faster than its current pace.

Surprisingly, the yen has yet to show significant reaction to Kataoka’s surprising dissent. Maybe bulls and bears are still waiting for Kuroda’s presser scheduled at 6:30 am GMT?

Major Market Mover(s):

AUD and NZD

Traders of high-yielding currencies like the Aussie and Kiwi stepped back against the Greenback as Asian session players priced in the Fed’s plans to raise rates by another time this year. Kiwi took another hit in the form of investors concerned over election risks over the weekend.

AUD/USD lost 22 pips (-0.27%) at .8001;
AUD/JPY dipped to 89.96 after hitting a session high of 90.29, and
GBP/AUD jumped 33 pips (+0.22%) to 1.4856.

Watch Out For:

  • 5:10 am GMT: RBA’s Lowe to give a speech in Perth
  • 5:45 am GMT: Switzerland’s SECO economic forecasts
  • 6:00 am GMT: Switzerland’s trade balance (2.41B EUR expected, 3.51B EUR previous)
  • 8:00 am GMT: ECB’s economic bulletin
  • 8:30 am GMT: U.K.’s public sector borrowing (7.1B GBP expected, -0.2B GBP previous)
  • 9:00 am GMT: ECB’s Praet to give a speech in Frankfurt