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NZD and AUD gains continue.

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Declining business confidence and consumer sentiment weighed on the AUD in the first half of last week, but the currency finished the week on a somewhat firmer footing thanks in large part to dovish remarks from the US Fed Chair Powell. In the wake of those remarks the AUD gained not just against the USD, but also against the GBP, EUR, CAD and JPY. That positive momentum was given a boost yesterday with Chinese activity data (industrial production and retails sales) both coming in stronger than forecast. Today’s RBA monetary policy meeting minutes may take a little wind out of the AUD’s sails, but the real focus this week will be on Australian employment data due Thursday. The market is looking for an employment gain of 9.2k with the unemployment rate to remain unchanged at 5.2%.

New Zealand

With little in the way of local data released from NZ last week, the currency traded on the back of offshore influences. The most notable of those was the dovish tone struck by US Fed Chair Powell when he testified before a congressional committee. That sent the USD lower and the NZD higher. The NZD largely outperformed most of its peers during this period to finish the week on a reasonably strong footing. Yesterday’s release of solid Chinese activity data also helped to boost the NZD across the board. This morning we have also seen the latest reading NZ inflation data and that came in bang on expectation at 0.6% q/q and 1.7% y/y.

United States

It has been an interesting week for the US economy, and the USD. Wednesday night’s testimony by Fed Chair Powell struck a decisively dovish tone, cementing expectations for an interest rate cut by the Fed when they meet on August 1st, and forcing the USD down against all its major currency peers. Powell specifically said that strong employment data released earlier this month hasn’t changed his outlook, but it’s not just employment data that is coming in better than expected. Toward the end of last week we saw inflation data increase and there may be more of that to come. The Core Produce Price Index release on Friday, which is used as a gauge of pipeline inflation pressure, also came in stronger than forecast. The market largely brushed the strong data off and continued to sell the USD, while equity indices soared to fresh record highs. The Fed’s Evans was on the wires reinforcing the central banks dovish stance while also seemingly admitting that the December 2018 interest rate hike may have been a mistake. He said the December hike “was the right move given what we knew at the time.” That’s about as close to an admission of an error as you will get from a central banker, and it will come as cold comfort for President Trump who criticized the Fed at that time for hiking. He’s kept the pressure on since then, mostly via twitter, and it seems the Fed is about to answer his repeated calls for lower rates.


The European industrial sector produced a rare data surprise at the end of last week, smashing predictions for a +0.2% gain in the month of May. The actual result came in at +0.9% m/m, much higher than anyone had forecast and its largest rise in four months. Some caution is warranted however as the gains were driven by a big jump in capital goods which may well be related to a boost in Airbus aircraft production. It also represents something of a bounce back from the prior months reading of -0.4% m/m. While the EUR gained against the USD in the latter stages of last week, it actually lost ground against the NZD and AUD, which both outperformed. This week’s economic calendar is mostly a second tier affair, with German ZEW Economic Sentiment, set for release tonight, the likely focus.

United Kingdom

The Bank of England’s (BOE’s) Vlieghe was quoted in the weekend press with what is probably the best summary of the current situation. He said until Brexit becomes clearer, the direction of the central bank’s monetary policy will also be as vague as what kind of Brexit may eventually materialise in the coming months. In other words, they are just as in the dark about where the economy, and by extension monetary policy, will go, due to the Brexit uncertainty. One thing is for sure, markets don’t like uncertainty and as such the Pound Sterling (GBP) is suffering as the 31 October deadline draws nearer with no agreement in sight. At this stage however, with indicators firmly pointing toward an outright contraction in UK GDP in the second quarter, the risks are skewed toward easier monetary policy at some stage between now and the end of the year. This week we get employment and earnings data, along with the latest readings of inflation and retail sales.


A raft of second tier data from Japan last week came in mostly negative with results for Core Machinery Orders, PPI and Industrial Production all failing to meet market expectations. We did get a better than expected result for Average Cash Earnings, at -0.2%, but it’s still printing in negative territory for the fourth month in a row. This week has started quietly with a Japanese bank holiday on Monday, and there is nothing scheduled for release until Thursday’s Trade Balance data.


The focus last week was all on the Bank of Canada’s (BOE’s) interest rate meeting. While they left interest rates unchanged at 1.75%, they did strike a notably dovish tone in their statement and that pressured the Canadian dollar. This week should prove interesting with a couple of key data points set for release. On Wednesday night we get inflation (CPI) data, then on Friday night we’ll get the latest reading on retail sales.

Major Announcements last week:

• UK GDP 0.3% as expected
• UK Manufacturing Production 1.4% vs 2.2% expected
• Bank of Canada leave interest rates unchanged at 1.75%
• US Core CPI +0.3% vs +0.2% expected
• US Core PPI 0.3%vs +0.2% expected
• Chinese GDP 6.2% as expected
• Chinese Industrial Production 6.3% vs 5.2% expected
• Chinese Retail Sales 9.8% vs 8.5% expected

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