he RBNZ kicked off a busy day for news in style announcing a surprise 0.25% interest rate cut and indicating it could but its official cash rate more if needed. Governor Wheeler indicated the cut was due to falling dairy and import prices and rising fuel prices. He indicated more supply would be needed to address rising house prices in Auckland rather than monetary policy
. He took more pot shots at NZD calling it overvalued and stating “a significant downward adjustment is justified”.
The RBNZ decision to cut interest rates is just the beginning of what looks to be a potentially very active day for trading in Asia Pacific markets.
There’s a lot of news to come today that could move the markets. Next up is Australia jobs with the street looking for a rebound from last month’s decline. AUD has been climbing into the news as a positive report would confirm recent RBA indications it has no plans to cut rates again in the near term.
Later today, another round of Chinese economic reports could spark another wave of trading in AUD, NZD, Australian stocks, copper and Chinese stocks. Yesterday, the PBOC cut its retail sales, GDP and industrial production forecasts for 2015 and traders may look to today’s numbers for confirmation of the slowdown. Weak reports could prompt the PBOC toward further stimulus through rate and reserve requirement cuts or other measures.
Yesterday, the Hang Seng, China A and related indices were knocked back after MSCI announced that it still needs to sort out market access issues with China’s government before it can add China stocks to global indices. This decision also suggested that the drive toward adding CNY to the IMG’s list of approved currencies could take longer that traders have been hoping.
Even though there isn’t any Japan specific news today, JPY pairs may remain active as traders continue to digest Bank of Japan Governor Kuroda’s comment that the real effective exchange rate looks unlikely to fall further
Later on, USD could be active as Fed speculation ramps up again. After the employment sparked rally fizzled, the greenback has been under pressure this week, enabling currencies and commodities to rebound. Today it was gold’s turn for a catch up bounce along, while energy also climbed but grains turned downward. US retail sales could spark another round of guessing on when the Fed may start raising interest rates with a strong report likely to boost the hawks and a weak report potentially emboldening the doves.
Crude oil started the day off strong but gave back some of its gains after the US posted another big inventory decline in what looks like profit taking against the news. CAD and NOK continue to strengthen overall but gave back some of their early gains as the day progressed in normal trading.
US and European stock markets posted 1.0-2.5% gains across the board on speculation that a deal could be reached soon. Reports suggesting that Germany could settle for one major reform and that parties could agree to a 9 month extension to the bailout program ending this month helped to boost stocks and caused Germany’s treasury yield to slip back under 1.00% after a brief breakout attempt. Overall, their sideways trends remain intact, creating opportunities for swing
traders on both sides.
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
RBNZ interest rate decision street 3.50% no change expected
US crude oil inventories (6.8 mmbbls) vs street (1.4 mmbbls)
UK NIESR GDP estimate 0.6% vs previous 0.4%
France industrial production (0.1%) vs street 1.0%
Sweden industrial production 1.5% vs street (2.0%)
Norway consumer prices 2.1% as expected
Italy industrial production 0.1% vs street 1.0%
UK industrial production 1.2% vs street 0.6%
Greece consumer prices (2.1%) vs street (1.0%)
Upcoming significant announcements include:
11:30 am AEST Australia employment change street 15K vs previous (3K)
11:30 am AEST Australia full-time jobs previous (22K)
11:30 am AEST Australia part-time jobs previous 19K
11:30 am AEST Australia unemployment rate street 6.2%
TBA South Korea interest rate 0.25% cut to 1.50% expected
3:30 pm AEST China retail sales street 10.1%
3:30 pm AEST China industrial production street 6.0%
4:00 pm AEST China Bloomberg monthly GDP previous 6.4%
7:45 am BST France consumer prices street 0.3%
8:30 am BST Sweden consumer prices street (0.1%)
10:00 am BST Greece Q1 unemployment rate street 25.4% vs previous 26.1%
8:30 am EDT US retail sales street 1.2%
8:30 am EDT US retail ex auto street 0.8%
8:30 am EDT US jobless claims street 275K
10:30 am EDT US natural gas storage street 113 BCF
8:30 am EDT Canada new house prices previous 1.2%
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