NZD/JPY struggles to capitalize on bounce from post-RBNZ low, remains below 87.00

NZD/JPY recovers swiftly after the post-RBNZ slide to a one-week trough.
A positive risk tone undermines the JPY and also lends support to the cross.
BoJ rate hike bets help limit further JPY losses and cap gains for spot prices.

Haresh Menghani FXStreet

The NZD/JPY cross rebounds around 80-85 pips from a one-week trough touched during the Asian session on Wednesday and touches a fresh daily high, around the 87.00 mark in the last hour. Spot prices, however, struggle to capitalize on the move and currently trade near the 86.80 region, up less than 0.20% for the day.

The New Zealand Dollar (NZD) initially drifted lower after the Reserve Bank of New Zealand (RBNZ) delivered the widely expected outsized interest rate cut at the conclusion of the February policy meeting. The immediate market reaction, however, turned out to be short-lived as the central bank signaled that the end of the easing cycle was now not too distant and that further moves would be smaller in size. This, in turn, prompts some short-covering around the NZD/JPY cross.

In fact, RBNZ Governor Adrian Orr suggested further cuts of 25 basis points could come in April and May. Apart from this, a generally positive tone around the equity markets undermines the safe-haven Japanese Yen (JPY) and further contributes to the goodish intraday move up. That said, the growing acceptance that the Bank of Japan (BoJ) will hike interest rates further this year helps limit the downside for the JPY and keeps a lid on any further gains for the NZD/JPY cross.

Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and positioning for an extension of the recent bounce from the 85.20 region, or a six-month low touched earlier this month.

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD weakens below 1.3450 as US-Iran uncertainty boosts safe-haven US Dollar

The GBP/USD pair loses ground to near 1.3425 during the early Asian session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar against the British Pound. All eyes will be on the US July jobs data, which is due later on Friday.

EUR/USD flatlines above 1.1500 as traders turn cautious ahead of US NFP data

The EUR/USD pair holds steady around 1.1505 during the early European trading hours. Markets remain cautious ahead of the crucial US July jobs report, which is due later this week. Eurozone inflation ticked up in July, bolstering the case for a rate hike from the European Central Bank. The headline Eurozone inflation rose to 2.9% YoY in July from 2.8% in June, in line with expectations.

Gold consolidates above $4,050 amid Fed hike bets and Iran uncertainty

Gold seesaws between tepid gains and minor losses during the Asian session as traders seem hesitant and opt to wait for further developments surrounding the Middle East crisis. The US Dollar struggles to build on the previous day's solid bounce from the lowest level since Mid-June and acts as a tailwind for the bullion. However, the uncertainty over US-Iran peace talks helps limit the downside for the buck.

Ripple and Stellar steady as derivatives data points to easing downside pressure

Ripple and Stellar show mixed price action, with XRP holding above the key $1 support zone while XLM faces rejection at $0.173. Meanwhile, improving derivatives metrics alongside fading bearish momentum suggest that the downside pressure may be easing for both altcoins. Derivatives data shows mild bullish sentiment among traders.

NFP week: What awaits Bitcoin and Gold

This is an NFP week as markets brace for the release of a large influx of job market statistics. The data rollout begins with the JOLTS Job Openings report on Tuesday, continues with the ADP Employment report on Wednesday and Jobless claims on Thursday, and finishes with the Nonfarm Payrolls report on Friday.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.