Why the NZD and AUD are Going Down
Antipodean Currencies See Some Downside
The NZD and AUD down 0.12-0.15% vs USD today, this could have relationship to data of some concern from China. If may be just a technical correction after their appreciation from previous days. RBNZ communication after the recent meeting is also helping to make them weaker. As for the local data, we had two figures overnight from New Zealand: 2Q retail sales jumping 2,3% QoQ in real terms (consensus was 1%, equal to 1Q print). In the last 10 years such pace was seen in only two quarters, apart from 2Q16. The second reading was manufacturing PMI – going down from 57.6 to 55.8 pts, so still quite strong. Employment component at 54.6 was a fifth increase in a row and is now highest since late 2014. A mix of declining stocks of finished goods and high new orders could mean a significant rebound in output in the following months. So definitely an NZD-supportive set, but the monetary policy issues seem to be the prevailing factor so soon after the last meeting. The Antipodean currencies may also see some movement today when US retail sales come out – a third positive monthly growth in a row can make USD recover from its losses since the last days of July.
McDermott (RBNZ) Comments On Rates
RBNZ assistant governor John McDermott repeats that more rate cuts will be needed to boost inflation. He also said in the interview that he prefers to adjust rate only on meeting accompanied by new projections. RBNZ with the August meeting switched to a new schedule of quarterly reports. They are no longer coming on the final month of the quarter but on the middle one. There will be no new projection in September, only in November (and these are the only two RBNZ meetings left this year) so what we should read from his speech is that focus should be on latter, not the former of the two meetings. The market generally agrees, but still assigns 30% probability to September. Announcing rate changes on the months of publication of the monetary policy reports is was RBNZ already does, at least since the start of 2015, the only opposite case in Jul-15 was due to the preference to move rates in 25bp steps – and this is why the June adjustment had to be extended to the following month.
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