Tuesday 7 November 2017

RBA, RBNZ takes the Floor

The RBA & the RBNZ will be taking their turn this week to announce their stance on interest rate. The RBA is expected to leave rates unchanged as Australia struggles with rising household debt and inflation remains way below the Bank's 2-3% target. The AUD has been on a downward spiral against the dollar since the release of soft retail sales number in October. Over in New Zealand, the RBNZ will also be meeting to decide on interest rate this week. The Labour party's election win dragged down the Kiwi dollar against other major currencies as the party's inexperience made investor's uncomfortable. A better than expected jobs data however reminded investors of the country's strong fundamentals despite lower growth outlook. The acting governor of the RBNZ will be expected to announce no change in cash rate but investors already anticipate a rate change at the next meeting. The Asian trading session saw the release of q/q inflation expectation which fell to 2% from 2.1% in August. This pulled down NZD/USD by 21 pips dropping to 0.6885 as at the time of writing. m/m ANZ commodities prices also fell to -0.3% from 0.8%.


USD gracefully went through the event full week coming out almost unscared as it recovered from the beating it took at the release of poor non-farm payroll numbers. EUR/USD rose to 1.1689 reacting to a decline in NFP,  before retreating back to 1.1607. President Trump confirmed Jerome Powell as the next Fed Chair, he is expected to carry on with the present monetary policy stance of gradual  rate increase, while the house released the tax bill. The new week will be a bit quite for the dollar in terms of economic data. The greenback's resilence despite the stormy week signals it may soon resume a rally.

 The Euro which had a quite week continued to suffer from post-ECB meeting reactions dropping to a low of 1.1606 against the dollar and EUR/CAD fell to 1.4808. The Euro's week will be dominated by final services PMI and other industrial & trade data from across Europe. A stronger Euro has triggered worries of lower export in some ECB policymakers hence, trade data will be watched closely. 8am today will see the release of some of these data which would shape the tune of the Euro for the new week.

BoE's highly anticipated meeting threw the pound down south as GBP/USD fell to 1.3058 despite a rate hike. This is a positive for UK exporters as weaker pound makes UK goods cheaper for trade partners. Industrial and trade numbers are also expected in the UK this week. The manufacturing sector remains a strong driver of UK's GDP post brexit as it bouyed  the country's faster than expected q3 GDP.

USD/JPY fell to 114.00, but has rebounded during the Asian session climbing up to 114.73. The Bank of Japan kept monetary policy unchanged at its meeting the prior week, but with a dovish BoJ, the discussion appears to be shifting to whether further measures are needed to accelerate the journey towards reaching the 2% inflation target. The summary of opinions of the October meeting, due on Thursday, should provide some insight as to how far the discussions went on the dissenting board member's view to start targeting the yield on 15-year Japanese government bonds in addition to 10-year ones.

On the commodities side, Gold plunged to 1,266 in Friday's trading while Brent crude rose by 0.29% to $62.25 as support grows for OPECs oil cut extension and Saudi clamps down on its corrupt leaders.

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