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August 2016

RBNZ cuts interest rates to a record low of 2%

Published: Thursday 11 August 2016

  • RBNZ cuts interest rates to a record low of 2%
  • US jobless claims awaited 

Overnight the biggest mover was the New Zealand Dollar as the Reserve bank of New Zealand cut rates by 25 basis points to 2%. Despite the cut and the RBNZ indicating that there would be more to come, the Kiwi rallied by 2% in the immediate aftermath although some of those gains have now been reversed. With markets chasing yield, it seems that the New Zealand Dollar is still fairly attractive in a world where negative rates are in vogue and being considered by major central banks.
The RICS survey fell to +5 in July from +15 a month earlier as property transactions declined, marking the weakest 2 months since June 2008. Last week Bank of England Governor Mark Carney highlighted signs that the housing market was weakening after the BOE cut interest rates to a new record low. In light of this news, it is not surprising that the Pound is continuing to depreciate. The Pound traded in a tight trading range overnight and is now testing the one month lows around 1.2950. Any rally looks likely to be short lived and 1.3100 is now a decent level of resistance.
The data calendar is fairly light today with only inflation figures due from France and Ireland this morning. Jobless claims from the US will be announced this afternoon and may garner more attention after the stellar Non-Farms last week. With little of note due to be released, current trends and ranges should prevail as traders position themselves ahead of the release of US Retail sales tomorrow.

Message from inside

John wrote to his son Mark in jail. Mark was serving a lengthy prison sentence for a bank robbery. John’s letter was a lengthy message about the family and what had been happening. He mentioned that he was planning to dig over the old rubbish patch at the far end of the garden to plant tomatoes. He also moaned about how bad his back was and how he was really not looking forward to starting the task but needed to do so.
Three days later a team of police officers arrived. They set about digging the ground over to a depth of about 3 feet. They examined and tested every inch of the soil and when they found nothing and left, John’s tomato patch just needed a little compost and it was ready for planting.
John wrote back to his son and asked what had happened. The letter he got back said, ‘All I did was  write back to you telling you that you should never dig up that ground whatever happens. I’m guessing that was intercepted.’

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
CAD 13:30 Canada: NHPI m/m 0.7% 0.2%
USD 13:30 US: Unemployment claims 269k 272k
USD 13:30 US: Import prices m/m 0.2% -0.2%
USD 15:00 US: Mortgage delinquencies 4.77% 4.77%
NZD 23:30 New Zealand: Retail sales q/q 0.8% 1.0%
NZD 23:30 New Zealand: Core retail sales q/q 1.0% 1.1%

FX Research by Ricky Nelson

Daily Currency Analysis with William Busby

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