New Zealand Markets closed

The USD in Focus, with Economic Data and Trump in the Spotlight

Bob Mason
China service sector activity picks up as the PBoC announces a 4th cut in the RRR, while the Greenback sees more upside early on.

Earlier in the Day:

There were no material stats released through the Asian session this morning, leaving the markets to consider the overnight FED rate hike and FOMC projections, Trump’s press conference and this morning’s RBNZ policy decision.

For the Kiwi Dollar, the RBNZ held rates at 1.75% as had been expected, while talk of improving labour market conditions provided a brief spike, a Kiwi Dollar rally tempered by the RBNZ’s concerns over the possible impact of the ongoing trade war between the U.S and China on the New Zealand economy.

In spite of better than expected growth in the 2nd quarter, the RBNZ noted that downside risks remained, with inflation continuing to fall short of the 2% mid-point of the RBNZ’s target supporting the need for status quo on policy. The RBNZ stated that accommodative policy would be maintained, with the next move unclear as the outlook for the global economy becomes clouded.

The Kiwi Dollar moved from $0.66562 to $0.66733 on the decision and release of the rate statement and monetary policy statement that preceded the RBNZ Governor press conference.

Through the RBNZ press conference, RBNZ Governor Orr reiterated key points from the policy statement, citing consumer price inflation sitting at below the 2% mid-point and caution over the outlook for domestic growth, the governor noting international trade policy tensions that could impact global growth.

On the bright side, reference to sliding business confidence was removed following September business confidence figures released on Wednesday, with the RBNZ Governor also seeing domestic consumption and government spending supportive of the economy near-term.

The Kiwi Dollar moved from $0.66622 to $0.66619 through the RBNZ press conference, before easing to $0.6656 at the time of writing, down 0.11% for the session.

Elsewhere, the Japanese Yen was up 0.03% at ¥112.70 against the U.S Dollar, geo-political risk supporting the Yen following the latest FED rate hike, as the markets look towards the Trump – Abe meeting on trade. For the Aussie Dollar, it was another positive start to the day, the Aussie Dollar up 0.03% at $0.7260 at the time of writing, recovering from losses earlier in the session.

In the equity markets, there was plenty of red, with the Nikkei down 0.33%, an uptick in the Yen and concerns over the Trump – Abe sit down weighing. Trade war jitters also pressured the CSI300 and Hang Seng, the pair down 0.39% and 0.44% respectively at the time of writing, while the ASX200 was down just 0.12%

The Day Ahead:

For the EUR, economic data scheduled for release through the day includes October’s German consumer climate figures and prelim inflation numbers for September, with the ECB’s economic bulletin also due out.

Following Draghi’s comments earlier in the week of an anticipated jump in inflationary pressures, the markets will be looking for any pickup in inflation in this afternoon’s numbers and also for any concerns the ECB may have over the economic outlook as trade tensions continue to weigh.

A 3rd speech of the week for Draghi later in the day could provide further upside for the EUR should Draghi talk up inflationary pressures for a second time, though even the ECB will be conscious of the possible effects of the ongoing U.S – China trade war on the Eurozone economy, BMW having already warned of a possible impact on earnings.

At the time of writing, the EUR was up 0.11% to $1.1752, today’s stats, the Italian Budget and noise from the Oval Office to influence.

For the Pound, there are no material stats scheduled for release through the day to provide direction for the Pound, while MPC Member Haldane and BoE Governor Carney are scheduled to speak in the early afternoon, which could provide some direction for the Pound, though it’s ultimately going to hinge on Brexit chatter through the day.

At the time of writing, the Pound was down 0.09% to $1.3155 with Brexit chatter the key driver through the day.

Across the Pond, it’s a busy day on the data front, with key stats due out of the U.S including finalized 2nd quarter GDP numbers, August pending home sales, durable goods orders and trade data and the weekly jobless claims figures.

Barring a deviation from 2nd estimate GDP numbers for the 2nd quarter, focus will likely be on the durable goods orders, market sensitivity towards negative figures out of the manufacturing sector heightened amidst the ongoing trade war between the U.S and China, though we won’t expect any major moves in the wake of the latest rate hike and FOMC economic projections.

At the time of writing, the Dollar Spot Index was up 0.08% to 94.265, today’s stats and the ever present Oval Office to provide direction through the day.

For the Loonie, it’s another quiet day on the data front, with NAFTA the main area of focus, news hitting the wires of Trump rejection a Trudeau meet a negative for the Loonie, which raises the prospects of trade tariffs.

At the time of writing, the Loonie was down 0.14% to C$1.3037 against the U.S Dollar.

This article was originally posted on FX Empire