FX News

RBNZ Remains Key Focus

Howard Wilcox

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The Reserve Bank of Australia kept the cash rate on hold at 0.75% as widely predicted by markets. The Central bank was relatively upbeat over the pending outlook pushing the AUD higher post release with Lowe suggesting the easing bias had come to an end. Benefits to the Australian economy were seen in the Trade Balance figures with a higher surplus than expected. The 7.18B figure for September printed higher than the 5.1B expected with the average monthly surplus for 2019 registering a healthy 6B. This is a large improvement from the 1.8B surplus in 2018. The RBA will ease rates further if they view it’s needed, with the next cut more likely than not still expected early 2020. This week’s focus will be on third quarter jobs data Thursday. Anything less than ideal could spell a fresh downside theme develop.

New Zealand

The New Zealand Dollar ran out of energy to the topside midweek after NZ employment data and US/China trade news spooked the risk associated currency lower. NZ unemployment came off an 11 year low of 3.9% to tick higher to 4.2% taking all the sting out of a buoyant kiwi. Rumours by the Chinese that the US had agreed to unwind all trade tariffs were confirmed incorrect by Peter Navarro director of Trade and Manufacturing which led to a fresh wave of negative sentiment towards risk currencies and the kiwi diving lower across the board. The kiwi has been the worst performer against the US Dollar over the week. Attention now turns to the Reserve Bank of New Zealand delivering their Cash rate announcement and monetary policy this Wednesday. Most analysts are expecting the RBNZ to cut 25 basis points from the record low of 1.0% with the central bank confirming recently they would adjust if required. With economic outlook skewed to the downside we would be surprised if we didn’t see a cut eventuate. With slowing GDP annualised at 2.1% in September slipping lower and business confidence looking bleak as well as jobs data a cut looks well priced into the curve, but the NZD may look to target fresh lows.

United States

The greenback was the strongest performing currency last week smoking its peers up over 1.5% against the New Zealand Dollar. Despite early reports that the US were relaxing trade tariffs on Chinese products, news last week suggested otherwise. Midweek speculation has been that US officials had agreed to roll back tariffs as part of the “phase one” deal. Director of Trade and Manufacturing Peter Navarro said if President Trump didn’t say it don’t believe it. He went on to elaborate- “There is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal- the only person who can make that decision is President Trump and it’s as simple as that.” Trump spoke after and said “the level of tariffs being lifted was incorrect.” but that talks were “moving along.” Key data this week out in the USA is monthly CPI and Retail Sales.


Eurozone PMI results continue to send worrying messages to markets with recent data not painting a pretty picture of growth in the region. This week’s German GDP for the third quarter follows poor indicators with markets expecting a second straight quarter of negative growth at -0.1% this Thursday. Will Germany officially slip into recession? This would be the first time since early 2013. Germany has been stuck in low gear for a while now which is starting to spread gloom into wider Europe.

United Kingdom

The Bank of England has maintained their overnight cash rate at 0.75% Friday with the committee agreeing 7 votes to 2 in favour. If Brexit uncertainty wasn’t enough, we now have political uncertainty to deal with now that the official election campaigns have started. A successful election campaign could give Johnson the votes he needs to get his deal through the House of Commons. Voting will keep things interesting on the currency front as depending on how strategic voting is we could see further massive volatility.  The ‘leave” camp and “remain” parties could end up splitting votes down the middle making for another hung parliament. We suspect the Pound may stay in the 0.4850- 0.5000 range against the kiwi for a while, anything resembling certainty could turn the GBP much higher across the board.


President Trump corrected mainstream media opinion on Friday – that he was looking at pulling back US tariffs, by saying he had no plans to remove the current tariffs in place on Chinese imported products. A risk off wave of uncertainty hit markets once again with buyers buying the safe haven Japanese Yen across the board. The Japanese wage earnings report published late Friday at 0.8% up from the anticipated 0.1% year on year- this is the average cash earnings per employee across Japan highlighting the first rise in nine months. Household spending also rose 9.5% from the same time last year, the quickest pace since 2001 figures. The figures are based on an imminent increase to sales tax in Japan from 8.0% to 10.0%. With slowing growth this tax though has been delayed twice in the past few months as the government fears by bringing in the tax this could lead to the economy slipping into a recession. This week we could see further selling in the cross JPY currencies if trade negotiation headlines continue to alarm markets.


The Canadian Dollar outpaced its rivals last week with strong performances into Thursday on a healthy dose of risk appetite. Trade Balance printed weaker than expected at -1.0B after -0.6B was expected followed by Friday’s Canadian employment data. The unemployment rate was unchanged at 5.5% but the workforce contracted by 1,800 people compared to the expected 15,000. Posting gains over the past two months of 135,000 this suggests we could be seeing a peak develop in the labour market. The Loonie was sold off into the weekly close comprehensively on the news together with fresh headlines President Trump had not authorised the unwinding of trade tariffs on China. This week’s calendar is light with just Bank of Canada Poloz speaking Friday.

Major Announcements last week:

  • Aussie Retail Sales dissapoints at 0.2%
  • NZ Employment rises from 3.9% to 4.2%
  • Bank of England leaves rates unchanged at 0.75%
  • RBA leaves rates unchanged at 0.75%
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