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The Asian bourses had a pretty chill start to a potentially volatile week, as only Japan printed economic data. That didn’t stop some volatility hunters, though.

  • Japan’s retail sales (y/y) up by 2.2% vs. 2.3% expected, 1.8% previous
  • Trump likely to pick Powell as next Fed Chairman – WSJ
  • NZ FinMin Robertson: New RBNZ mandate could “potentially” result to lower rates

Major Events/Reports:

Japan’s retail sales report

Data from the world’s third largest economy saw its retail sales rising at the fastest pace in three months in September. What’s more, it also marks the 11th consecutive month of gains!

Japan’s retail sales rose by 0.8% in September after seeing a downwardly revised 1.6% drop in August. In annualized terms, this translates to a 2.2% increase, which might be weaker than the expected 2.5% uptick but is still better than the previous month’s 1.8% annualized growth.

A closer look tells us that sales increased faster for fabrics, apparel, and accessories; food and beverages, and fuel while sales slowed down for motor vehicles and machinery and equipment.

As good as the numbers are, they didn’t affect the yen much. One possible reason is that this won’t change the BOJ’s easing stance especially when the latest CPI report printed underwhelming results.

And then there’s the top-tier reports scheduled this week, which could have pushed yen players to the sidelines.

Trump to pick Jerome Powell?

A few hours ago the Wall Street Journal cited “people familiar with the matter” and said that President Donald Trump is likely to announce Fed member Jerome Powell as his Fed Chairman pick.

Recall that, between top contenders John Taylor and Powell, the former is seen as the more hawkish pick.

If confirmed by the Senate, Powell will take Yellen’s place by February. Let’s hope whoever gets the spot lives up to Trump’s confidence that “It will be a person who hopefully will do a fantastic job!”

RBNZ’s new mandate = rate cuts?

In an interview over the weekend, new Finance Minister Grant Robertson hinted that adding full employment to the Reserve Bank of New Zealand’s (RBNZ) mandate could lead to rate cuts. Yipes!

Remember that Jacinda Ardern’s new coalition government has talked about adding full employment on top of the RBNZ’s mandate to hit its inflation target.

Robertson defended the change, saying that it’s already targeted by central banks such as the Fed and RBA:

“We’re actually just bringing our monetary policy up to speed to make sure it’s contributing to the wider outcomes we want in the economy.”

And when asked if the policy changes would mean lower interest rates, Robertson said that “potentially, it could.”

He added that

“What it means is that when the Reserve Bank is making its decisions about the official cash rate, when it’s thinking about monetary policy, of course it thinks about managing and controlling inflation, and that’s vital…but also it thinks about other goals in the economy such as making sure that we maximize employment.”

However, Robertson assured that there won’t be any policy changes at least until a new RBNZ Governor is appointed in March 2018.

Major Market Mover(s):

USD

The Greenback took some hits across the board as traders priced in the possibility of a less hawkish Fed Chairman pick.

EUR/USD is up by 9 pips (+0.08%) to 1.1615;
USD/JPY is down by 15 pips (-0.13%) to 113.58;
GBP/USD is up by 11 pips (+0.08%) to 1.3141, and
USD/CHF is down by 3 pips (-0.03%) to .9972.

NZD

Kiwi also saw some losses after NZ’s new FinMin hinted of possible rate hikes down the road.

NZD/USD is down by 24 pips (-0.35%) to .6843;
NZD/JPY is down by 37 pips (-0.47%) to 77.72;
EUR/NZD is up by a whopping 100 pips (+0.59%) to 1.6975, and
AUD/NZD is up by 45 pips (+0.40%) to 1.1219.

Watch Out For:

  • 6:00 am GMT: Germany’s retail sales (0.6% expected, -0.4% previous)
  • 6:00 am GMT: Germany’s preliminary CPI to remain at 0.1%?
  • 7:00 am GMT: KOF leading indicator (106.5 expected, 105.8 previous)
  • 7:00 am GMT: Spain’s flash CPI (y/y) (1.7% expected, 1.8% previous)
  • 7:00 am GMT: Spain’s flash GDP (0.8% expected, 0.9% previous)
  • 8:30 am GMT: U.K.’s mortgage approvals (66.0K expected 66.6K previous)
  • 8:30 am GMT: U.K.’s net individual lending (5.5B GBP expected, 5.6B GBP previous)