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Asian session trading mostly took cues from the previous session’s risk aversion but Kiwi took a harder hit on another bearish FinMin remark.

  • Japan’s household spending (y/y) slips by 0.3% vs. 0.7% gain expected, 0.6% growth previous
  • Japan’s unemployment rate remains at 2.8% as expected
  • Japan’s preliminary industrial production slips by 1.1% vs. -1.6% expected, 2.0% previous
  • AU HIA new home sales drops by 6.1% in September after 9.1% gain in August
  • AU private sector credit up by 0.3% vs. 0.5% expected and previous
  • NZ ANZ business confidence clocks in at -10.1 vs. 0.0 previous
  • U.K.’s GfK consumer confidence at dips from -9 to -10
  • China’s manufacturing PMI falls from 52.4 to 51.6 in October
  • China’s non-manufacturing PMI slips from 55.4 to 54.3
  • BOJ keeps policies unchanged as expected
  • BOJ cuts inflation projections for current fiscal year
  • BOJ’s core CPI (y/y) 0.5% as expected vs. 0.6% previous
  • Japan’s housing starts (y/y) down by 2.9% vs. 3.0% decline expected, 2.0% -previous

Major Events/Reports:

BOJ’s decision a non-event

As expected, the Bank of Japan (BOJ) kept its policies unchanged for another month in November. In an 8-1 decision, BOJ members kept interest rates at -0.1% and will continue to buy JGBs at around 80T JPY so that 10-year yields will be “at around zero percent.”

New member Goushi Kataoka dissented in both decisions as he prefers the central bank to have firepower in case “there was a delay in the timing of achieving the price stability target due to domestic factors.”

Meanwhile, outstanding amounts of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) will be kept at 6T and 90B JPY respectively, and CP and corporate bonds purchases will have outstanding balances of 2.2T and 3.2T JPY respectively.

What caught market players’ attention more is that Kuroda and his team once again cutting their inflation forecasts.

Consumer prices is now expected to rise by an annualized rate of 0.8% in FY 2017, which is slower than the 1.1% gain seen in July, while CPI is now expected at 1.4% in FY 2018 instead of 1.5% last July.

Despite that, the BOJ remains optimistic in general, saying that “the economy is likely to continue expanding” on the back of easy financial conditions and government policies as well as moderate growth in overseas economies.

China’s PMI misses

Manufacturing activity in the world’s second largest economy continued to expand (but at a slower pace) in October.

Official manufacturing PMI clocked in at 51.6, which is weaker than September’s 52.4 reading and the expected reading of 52.2. Analysts point to the government’s efforts to curtail pollution by limiting manufacturing activity and upgrading China’s industrial sector by shutting down outdated assets.

China’s non-manufacturing PMI also missed expectations at 54.3 after September’s 55.4 reading. A closer look tells us that new orders, business sentiment, and employment all took hits, while new export orders grew for the first time in three months.

NZ FinMin not too concerned over weak Kiwi?

In an interview with Radio New Zealand, new Finance Minister Robertson sounded pretty chill about the New Zealand dollar declining by 4.0% since the election, saying that

“Whenever there’s change, the markets will react to that, and we’ve seen that with other governments around the world. People will soon see the outcomes of the election and how it effects actual everyday policy and I’m confident they’ll see we’re a Government that’s focused on managing the economy sensibly” with rules around budget responsibility and a focus on creating “good solid jobs growth”.

He added that “Any volatility we’ve seen is a reaction to a change of government, that would have happened anywhere in the world and I’m sure the markets will see they can be confident in the government” and that “over time an equilibrium will be found.”

Major Market Mover(s):

NZD

The New Zealand dollar took a one-two punch from New Zealand’s weak business sentiment report and bearish rhetoric from NZ’s FinMin.

NZD/USD is down by 30 pips (-0.44%) to .6848;
NZD/JPY is down by 32 pips (-0.41%) to 77.49;
GBP/NZD is up by 74 pips (+0.39%) to 1.9284, and
AUD/NZD is up by 32 pips (+0.29%) to 1.1213.

Watch Out For:

  • 6:30 am GMT: France’s flash GDP (q/q) to remain at 0.5%?
  • 6:30 am GMT: BOJ’s Kuroda to give a post-decision speech
  • 7:45 am GMT: France’s consumer spending (0.6% expected, -0.3% previous)
  • 7:45 am GMT: France’s preliminary CPI (0.1% expected, -0.1% previous)
  • 9:00 am GMT: Italy’s monthly unemployment rate (11.1% expected, 11.2% previous)
  • 10:00 am GMT: Euro Zone’s CPI flash estimate (y/y) to remain at 1.5?
  • 10:00 am GMT: Euro Zone’s CPI flash estimate (y/y) to remain at 1.1?
  • 10:00 am GMT: Euro Zone’s flash GDP (q/q) (0.5% expected, 0.6% previous)
  • 10:00 am GMT: Italy’s preliminary CPI (0.1% expected, 0.3% previous)
  • 10:00 am GMT: Euro Zone unemployment rate (9.0% expected, 9.1% previous)