AUDUSD Day’s range: 0.72286 – 0.72696
Yesterday’s RBNZ monetary policy decision (0.25% v. 0.50% exp) and the FOMC meeting minutes lead to a selloff in both AUD and NZD. Investors are expecting the central bank of New Zealand to raise its lending rate but RBNZ chose to keep its lending rate at 0.25% unchanged. According to their forecast, the RBNZ will likely be raising rates in their upcoming meetings with 175 basis points of a rate hike now being priced in for the next two years. Furthermore, the spread of the Covid-19 delta variant in the Asia Pacific, the lagging vaccination rates, and the very strict lockdown have a negative impact on Asia Pacific currencies. The market reaction was a sell-off in Asia Pacific currencies including AUD and NZD.
The FOMC meeting minutes were more hawkish than initially expected. Some FOMC members are pushing for an asset tapering as soon as September, although December is more likely to be the timing barring significant upside data prints. FOMC officials felt their employment benchmark for decreasing support for the economy could be reached this year, but they disagree on other key aspects of where monetary policy should turn next in the transition from the pandemic crisis.
Data:
- NZ Q2 PPI Input & Output : 3.0% & 2.6% v. 0.9% & 0.4% exp.
- AU July MI Leading Index : -0.1% v. -0.1% prev.
- AU Q2 Wage Price Index : 0.4% v. 0.6% exp.
- NZ RBNZ Monetary Policy Decision & Press Conference : 0.25% v. 0.50% exp.(no change to policy)
- UK July H/line CPI (y/y) : 2.0% v. 2.3% exp.
- CA July H/line CPI : 0.6% v. 0.3% exp.
- US EIA Crude Oil Inventories : -3.2Mio v. -1.5Mio exp.
- US FOMC Meeting Minutes (4am AEST) – Some FOMC members are preparing to begin their asset purchase taper in 2021, with the timing varying dependant on the member
Major moves in the market
Stocks
- S&P 500 contracts dropped 0.1% as of 7:05 a.m. on Tokyo. The S&P 500 fell 1.1%
- Nasdaq 100 futures were steady. The Nasdaq 100 fell 1%
- Nikkei 225 futures fell 0.8%
- Australia’s S&P/ASX 200 Index futures lost 0.7%
- Hang Seng Index futures rose 0.2% earlier
Currencies
- The Japanese yen was at 109.79 per dollar
- The offshore yuan traded at 6.4860 per dollar
- The Bloomberg Dollar Spot Index was little changed
- The euro was steady at $1.1710
Bonds
- The yield on 10-year Treasuries was little changed at 1.26%
Commodities
- West Texas Intermediate crude fell 1.3% to $65.59 a barrel
- Gold was flat at $1,787.55 an ounce
Upcoming data
- AU July Employment Change & Unemployment Rate : -42.5K & 5.0% exp.
- EU June Current Account : 12.3Bio exp.
- CA July ADP Non-Farm Employment Change : -294.2K prev.
- US August Philly Fed Manufacturing Index : 23.2 exp.
- US Weekly Unemployment Claims : 362K exp.