Dr Copper’s diagnosis, the RBNZ meeting this week and the playbook for the UK general election polls
|Understanding the diagnosis of ‘Dr Copper’
Copper has the nickname, Dr Copper, due to its ability to make a diagnosis about the global economy. The use of copper by the world economy when it is growing increases. Electronics, wiring and a wide range of industrial and manufacturing processes need copper. When the economy is growing, demand for copper increases, and therefore the price. So, when the market is risk on and optimistic about global growth Copper prices rise. So, want a clue about the markets view on the state of global growth? Book an appointment with Dr Copper for a helpful consultation.
Don’t miss the key scheduled events for the NZD this week
It was the NZD business confidence data point for the NZD last week that has increased expectations of an RBNZ rate cut this coming week. The uptick in unemployment to 4.2% (from 4.1% expected and 3.9% prior) saw some weakness enter into the NZD. The weak reading saw an eventual move down towards 0.6350 for the NZDUSD pair last week.
The RBNZ meet next week and the probability of a rate cut is now at 64.3% (it was 54% prior to the unemployment data) and 72.6% for next month's meeting. This will weigh on the NZD into next week's meeting. However, although the main event will be the RBNZ rate decision the release of the two-year inflation expectations the day before will be a very important event to watch.
The RBNZ places a great deal of importance on the inflation data release named it as one of the main reasons for cutting interest rates by 50bps.
Thus, if the 2-year inflation expectations come in below 1.86%, we could see a big reaction from this event (with immediate NZD sellers) as the markets cement in their expectations for a rate cut the following day. This is the key event to watch this week for a potential high conviction trading opportunity. Release time Tuesday, November 12, 02:00am.
What’s driving the GBP now we have a general election?
The UK is due to have a general election on December 12.
The main driver on the GBP will now be about which party is leading the polls.
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If the conservatives are leading the polls, expect GBP strength
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If labour are leading the polls, expect GBP weakness
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If the Lib Dems lead, expect GBP strength (as they are an explicit remain party)
The most likely outcome, at this stage, is for a conservative victory. Therefore, expect the GBP to remain supported over the medium term on for now.
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