FX News

Focus on RBA and RBNZ cash rate announcements

Howard Wilcox


Friday’s Building Approvals disappointed, to be fair it was only going to go one way with approvals falling 0.6% in March. The release pulled the Australian Dollar lower to a four month low of 0.6985 against the greenback. US (NFP) Nonfarm Payroll came in higher than markets were expecting at 263k and 3.6% unemployment a 49 year low, with the Aussie traded back to 0.7030 at the weekly close. US trade talks have again reared its ugly head with tariffs to be raised this Friday from 10% to 25% on Chinese made products entering the US. Talks between the US and China were supposed to take place this Wednesday but China are considering cancelling talks after recent Trump threats. In a fresh wave of downside momentum the Aussie is battling to stay over the pivotal 0.7000 level and looks extremely vulnerable ahead of tomorrow’s Retail Sales and RBA cash rate announcement which could go either way – down or remain unchanged at 1.50%

New Zealand

On the surface things looked rosy with NZ unemployment nudging lower to 4.2%, however the size of the workforce shrank 0.5% raising further questions as to whether the RBNZ will lower the cash rate this Wednesday. Chances range around the 50% probability for a cut at the meeting. We think the RBNZ will hold for a while yet possibly through to the August meeting. Quarterly inflation expectations print first today at 3pm NZT and are expected to remain at 2.0%. In the past the RBNZ have spoken about the downside risks to the NZ economy due to the decreased global outlook, but the threat of such a view for global growth seems to have been overstated. Although with renewed US China trade discussions taking a turn for the worst with the 10% tariff increase to 25% this Friday, this could sway RBNZ opinion. We have said a few times how we think Trump is sugar coating the true picture- expect things on the trade front to become considerably worse before anything improves. The kiwi is trading around the 0.6600 level against the greenback- if rates are cut we should see a retest of the yearly low of 0.6580.

United States

US (NFP) Non-Farm payrolls smashed expectations Friday, increasing by 263k from the 181k markets were predicting. The US unemployment rate also surprised coming in at 3.6% from 3.8% expected, making this the lowest level of unemployment in 50 years since 1969. Equities markets all traded over 1% higher with the S & P trading just off its record high. What’s interesting is the US Dollar never saw any upward bias instead closing the week lower across the board. The WSJ index measuring the value of the Dollar traded down 0.4% to 90.51 after the release. We suspect with the average hourly earnings highlighting poor wage growth (0.2% instead of 0.3%) and the following ISM Manufacturing data weaker at 55.5 instead of 57.2, this dragged the Dollar lower. In the latest round of trade tariff speak – President Trump has confirmed the 200B worth of Chinese products which are currently set at 10% tariff, will increase to 25% this Friday. US China trade talks are to resume this Wednesday but in recent news Chinese officials may cancel discussions. Later in the week CPI m/m publishes.


It was a sea of green in the euro-zone for economic data last week as every release surprised to the upside. The Euro started the week against the US Dollar around 1.1150 and rallied to a much needed high of 1.1260 as optimism buoyed the currency higher. GDP growth printed at 0.4% for the last quarter ending March, a significant jump on the 0.1% growth seen in the previous two quarters, matching growth from the first half of 2018. Annual inflation was also higher with inflation expected to be 1.7% to April 2019 higher than the 1.4% forecast in March. Core CPI y/y to April 2019 published at 1.2% from the 1.0% markets were predicting rebounding from March’s poor 0.8% reading. The European Central Bank are targeting 2.0% inflation growth in the medium term highlighting how far short they currently are. Wednesday we have flash GDP q/q which is expected to show a result of 0.2% for the quarter ending March 2019.

United Kingdom

The Bank of England governor Carney left the benchmark cash rate unchanged at 0.75% in a unanimous 0-9 vote to keep it as it is for a while longer. The bank have set monetary policy at a 2% inflation target with a rising forecast through to 2021. In a fresh set of forecasts investors will need to upgrade their expectations for growth. Carney said unemployment will fall further with the economy expected to generate more demand. He also went on to say the timing around Brexit now, late October, would have volatile results for economic data and how it concludes will be the biggest factor weighing on outlook. The Pound reversed prior week losses against the greenback pushing back above key 1.3000 levels to a five week high of 1.3175 before easing around 1.3100 Tuesday.


The Japanese Yen has spent the last 10 days bouncing around in extra volatile markets with the Japanese celebrating an imperial stint of absence as they prepare for the emperor’s son Prince Naruhito to take the throne today. Monetary policy minutes is released tomorrow, a detailed rundown of the Bank of Japan’s monetary policy meeting of March 20. Consumer confidence survey is Thursday which is not expected to be a positive result.


Testifying before the senate committee, Canadian Central Bank governor Poloz confirmed rates would rise if issues affecting the economy dissipated. Recent economic data has been positive for the central bank but until now Poloz has maintained a neutral bias based on uncertainties with the global outlook. It therefore won’t make his day after hearing President Trump’s approach to the China/US trade disputes has just taken a turn for the worse. Trump has been saying for weeks that a new trade deal was just around the corner but yesterday he confirmed tariffs of 10% on 200B worth of Chinese products would increase to 25% this Friday. What makes the situation super shaky is the Chinese look to cancel Wednesday’s talks. This week’s key economic data sees Trade Balance Friday along with unemployment figures. Crude oil is back on the slide with prices hovering around the 61.00 area after two straight weeks of declines. US Sanctions on Venezuela and Iran have further strained global stores and may impact price again this week.

Major Announcements last week:

  • Chinese Manufacturing prints down on expectations deteriorating risk currencies
  • NZ Employment rate remains unchanged at 4.2% but concerns raised with the workforce shrinking
  • Federal Reserve leave rates unchanged at 2.5%
  • Bank of Englnd leave benchmark rate unchanged at 0.75%
  • Australian Building Approvals dissapoints at -15.5 on estimates of -12.5
  • US Non Farm Payrol prints above expectations at 263k with the unemplyment rate falling to a 50 year low of 3.6%
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