Kiwi outperforms on RBNZ Governor comments

Waiting until November

The New Zealand dollar was the best performing Asian currency during this morning’s session after RBNZ Governor Orr said that the central bank will do whatever is necessary to support the local economy, but can afford to wait and see what is happening. This implies that the Bank will be monitoring the impact of the bigger-than-expected cut in the official cash rate on August 7 and, if things appear to be going well, may hold off on further cuts in the near term.

He added that the RBNZ will likely wait until November and possibly cut if necessary. Currently, interest rate markets are assigning a 70% probability of a 25 bps cut at that meeting, with just an 11% chance for September.

In response to the comments, the Kiwi advanced versus the US dollar and the Japanese yen, with NZD/USD potentially facing the first up-day in three days. NZD/USD was up 0.45% at 0.6393 while NZD/JPY climbed 0.51% to 68.111 by lunch.

NZD/USD Daily Chart

Source: OANDA fxTrade

 

Progress on the trade front

Unfortunately, it’s not between the US and China, but between the US and Japan. Japan’s economy Minister Motegi said that ministerial level talks between US and Japanese negotiators will resume tomorrow, as talks have been extended by one day. These talks are mostly focused around agriculture and autos. He added that they are getting close to a conclusion, and it is possible that US President Trump and Japan PM Abe may discuss trade talks on the sidelines of the G7 meeting this weekend.

USD/JPY traded slightly higher during this morning’s session, rising to 106.62 amid a broader risk-on mood which saw all indices in the black. Wall Street indices rose between 0.35% and 0.52%, with the NAS100 index outperforming, while China shares rose more than 1% to hit the highest level this month. Hong Kong shares recouped half of yesterday’s losses after a quiet night on the streets.

China A50 Daily Chart

Source: OANDA fxTrade

 

The Jackson Hole spotlight

There are a number of Fed speakers on the supporting bill at Jackson Hole, including Bullard, Kaplan, Mester and Harker, but it will be Chairman Powell who will steal the limelight at 1400GMT today. No matter what the expectations are for the content of his speech, we are likely to see some serious volatility during and afterwards. Buckle up for a bumpy ride.

Economic data will take a back seat today, but for the record, US new home sales are expected to decline 0.2% m/m in July, a turnaround from June’s +7.0%.