The Reserve Bank of Australia (RBA) left interest rates and policy settings unchanged after Tuesday’s meeting, which lent some support to the Australian dollar. The RBA continues to forecast a September start to tapering asset purchases (quantitative easing) and this was a surprise to some in the market who had expected the recent Covid lockdowns would see the bank delay tapering. It seems the central bank isn’t too concerned about the economic impact of the current lockdowns, at least at this stage. But with cases still growing sharply the likelihood of the current lockdowns dragging out much longer than expected is rapidly growing.
The New Zealand dollar (NZD) is one of the strongest performers this week, boosted higher by much better than forecast employment data on Wednesday. The NZ unemployment rate fell from 4.7% to 4.0% against expectations for a decline to 4.4%. This was very good data and it only served to cement expectations for an RBNZ tightening cycle that should kick off in a couple of weeks’ time. A 0.25% interest rate hike on August 18th is fully priced into the market now, and the growing expectation is that we could see 4 more hikes after that taking the cash rate to 1.50% by mid next year. With that sort of outlook, the NZD is well supported and we expect any dips to run into solid support over the coming weeks.
Tonight we have key monthly employment numbers from the United States. Non-Farm Payrolls data hits the wires at 12:30am NZ time and it has potential to add significant volatility to the currency market. Expectations are for a gain of 870k jobs, which would be a slight improvement over the prior 850k. US unemployment is forecast to fall from 5.9% to 5.7%.
Worldwide coronavirus cases surpass 201.51 million with over 4.276 million official deaths.
The Bank of England left interest rates and QE level unchanged at their regular meeting.
US equity markets remain robust, with the S&P up 0.6% at record highs overnight.
Sydney recorded another 262 cases Thursday.
The state of Victoria goes into a 7 day lockdown from 8pm last night.