Kiwi rallies on better employment data and RBNZ comments

Feb 03 2016, 1:30 pm

Today’s Economic events

  • Australia AIG services index 48.4 vs. 46.3 previously
  • BoJ releases monetary policy meeting minutes
  • RBNZ Governor Wheeler speech
  • Australia building approvals m/m 9.20% vs. 4.80%
  • Australia trade balance -3.54Bn vs. -2.45bn
  • China Caixin services PMI 52.4 vs. 50.5
  • BoJ Gov. Kuroda speech
  • Japan consumer confidence 42.5 vs. 43.8
  • Spain services PMI 54.6 vs. 54.6
  • Italy services PMI 53.6 vs. 54.2
  • France services PMI 50.3 vs. 50.6
  • German services PMI 55 vs. 55.4
  • Eurozone services PMI 53.6 vs. 53.6
  • UK services PMI 55.6 vs. 55.4
  • Italy prelim CPI m/m -0.20% vs. -0.10%
  • Eurozone retail sales m/m 0.30% vs. 0.40%
  • ADP private payrolls 205k vs. 193k

Coming up

  • US Final services PMI
  • US ISM non-manufacturing PMI
  • US Crude Oil inventories

The Yen continued to gain momentum as Oil prices declined strongly yesterday pulling down the equity markets, leading to a risk aversion. The Yen strengthened across the board until BoJ’s Kuroda commented that the BoJ had ample room for further monetary policy easing, which managed to help sustain the gains in the Yen. However by NY open, the Yen was seen gaining strength yet again. USDJPY is currently down -0.57% for the day after posting a session high to 119.965. The Asian equity markets all closed lower with the Nikkei225 down -3.15% for the day while the Shanghai Composite lost -0.35% on the day.

The Kiwi touched a 3-week high this morning as the New Zealand quarterly employment report came out better than expected and RBNZ Governor Wheeler’s speech. The Kiwi shrugged off the GDT price index data which fell -7.40%. The unemployment rate fell to 5.30%, against expectations of an increase to 6.10% from 6.0% recorded in the previous quarter. The quarterly employment change also increased by a modest 0.90%, beating estimates of 0.80%. However, hourly earnings for the quarter rose less than expected at 0.20%, falling below estimates of 0.50%.

A few hours later, RBNZ Governor Wheeler’s comments hit the wires. He noted that “inflation does not need to be within the 1.0 – 3.0% target range” while adding that “Low Oil prices are recognized as one of the factors which could cause inflation to fall outside the target band“.

The Kiwi surged on the news to rally as much as 1.40% for the day, trading at 0.66. The AUDUSD also got a boost, currently with gains of 0.37%. Australian building approvals increased 9.20% for the month, above estimates of 4.80%. However, trade balance numbers showed a deficit of -3.54bn on falling exports to China. AUDUSD is currently trading at 0.706.

The European session was marked with services PMI data. The Eurozone services PMI was as expected to rise to 53.6. The EURUSD remains on a strong footing with 0.30% gains for the day trading at 1.095. The Euro managed to hold its gains since yesterday as ECB’s Mersch commented that the ECB is yet to decide on the monetary policy decision due in March and noted that markets should not front run expectations.

UK’s services PMI was rather soft but better than estimated, rising to 55.6 above estimates of 55.4. The British Pound continued its rally after easing back yesterday. GBPUSD is currently up 0.88% for the day, posting strong gains after the PMI data was released. European equities are currently down with the German DAX down -1.05% while the London FTSE100 is down by -0.59% for the day.

The NY session opened with the ADP private payrolls showing a better than expected print, with the US economy adding 205k jobs beating estimates of 193k. The US Dollar, however, remained muted to the news as most of its peers continued to rally higher. On the commodity front, Gold prices continued to maintain its lead as Gold is up another 0.25% at the time of writing, trading near $1132.15. WTI Crude oil prices are posting a rebound today, gaining 2.22% for the day after plunging to $29.4 in early trading session today.

The remainder of the evening will see the US ISM non-manufacturing and services PMI followed by the weekly Crude Oil inventories report.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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