FX Daily - Westpac

Westpac analysts deliver their breakdown of the day's events, and where markets might turn from here.

Key quotes

"There was a brief dip in US treasury yields and USD/JPY as China state news agency Xinhua said China would take “strong counter-measures against US tariffs” but otherwise risk appetite improved modestly.

Central bankers spoke on a panel at an ECB forum in Portugal. RBA governor Lowe said issues around trade tariffs were “incredibly worrying.” He also said inflation might be lower than the RBA would like for a while and that the bank had not embraced forward guidance (perhaps a reference to the June minutes’ removal of the line about the next move on rates likely to be up).

Fed chairman Powell said the case for further gradual rate hikes remains strong and that the funds rate is perhaps 100 basis points below neutral – which is essentially just describing the “dots” in last week’s quarterly projections. Powell did say though that the Fed’s business contacts are expressing increased concern over US trade policy.

 With 9 days left in Q2, we finally see New Zealand Q1 GDP data (8:45am Syd/6:45am Sing/HK). Growth momentum looks to have slowed, with Westpac forecasting 0.4%qtr, 2.8%yr, which would be the slowest growth since 2014. The public sector and agriculture should be stronger, but consumer spending looks to have been muted. Consensus is 0.5%qtr and the kiwi often responds to this data.

Asia’s calendar is low key – Thailand May trade data and an expected steady hand at 1.375% by CBC Taipei, which has kept steady for 2 years.

There is no real tension over the outcome of the BoE MPC policy meeting, with pricing for a rate hike near zero and only rising above 40% for the 2 August meeting. But there is always plenty to absorb in the statement and minutes. GBP/USD hit lows since November on Wednesday, which seems unlikely to be of much concern to the MPC.

The US data calendar remains low key – weekly jobless claims (though it is for the week that includes the June payrolls survey) and the June Philadelphia Fed business survey."