- New Zealand exports fall 0.80%, imports down 1.0% in June
- Yen strengthens amid conflicting views on BoJ’s action this Friday
- Sterling comes under pressure after BoE’s Martin Weale comments
- US dollar slides ahead of FOMC meeting tomorrow
Today’s Economic events
- Japan SPPI y/y 0.20% vs. 0.10%
- UK BBA Mortgage Approvals 40.1k vs. 40.2k
Coming Up
- S&P/CS HPI
- US flash services PMI
- The US consumer confidence
- The US new home sales
- Richmond manufacturing index
New Zealand posts a trade surplus in June
New Zealand’s annual deficit saw a modest improvement, easing back to $3.3 billion from $3.6 billion in May on better than expected trade balance numbers. Data from Statistics New Zealand showed that in June, New Zealand posted a trade surplus of $127 million, slightly lower than the consensus forecasts of $150 million. It was also down from May’s $358 million.
Export values fell 0.80% on a seasonally adjusted basis as meat and log exports fell following two months of growth while dairy and fruit exports drove exports, rising 9.90% and 7.60% respectively. Goods exports increased 5.80% on the month.
Imports were down 1.0% on the month but grew at a pace of 0.50% in the second quarter. Capital goods imports contributed to nearly 15% of the imports while intermediate goods were down 3.80%. The quarterly deficit was recorded at 173 million, which accounts for 1.40% of exports but continued to record a ninth consecutive quarterly trade deficit since 2014 March.
The New Zealand dollar was seen trading stronger after the report. ASB economist, Nathan Penny said that nine out of 10 export categories posted an annual increase in June, but he said that the RBNZ could maintain its easing bias. “We expect the RBNZ to cut the OCR in August and November,” Mr. Penny said, highlighting that the data is unlikely to change the RBNZ’s stance.
Yen strengthens as traders puzzled by conflicting reports
The Japanese yen strengthened, sending USDJPY weaker for the second day. Trader sentiment remained mixed as rumor mills continue to play a direct role in the yen’s currency moves. While last week, the rally in USDJPY was all about building expectations of possible coordinated efforts from the BoJ and the Japanese government, the bullish view eased back after new reports from the Nikkei business daily suggested that the government was likely to announce a 6 trillion yen fiscal stimulus package.
This was met with disappointment among traders who were bracing to see the BoJ and government doing more. Adding to the disappointment was the fact that the proposed spending is expected to roll out over the next few years. The reports, however, cite that the stimulus spending package is still a draft. “The total size of the package, which could be announced as soon as Aug. 2, could exceed 20 trillion yen,” says the report from Nikkei business daily.
The latest rumors of the lesser than expected 10 trillion yen stimulus package also saw investors scaling back their bets on the BoJ and subtly hinting at more caution as hopes fade that the BoJ will likely stand aside at this Friday’s monetary policy meeting. The proposed 6 trillion spending plan is expected to come out of the government’s supplementary budget and is expected to be formally announced on August 2, just two days after the BoJ’s meeting which adds weight to the speculation that the BoJ could sit on its hands.
Tomoichiro Kubota, the senior market analyst at Matsui Securities, said, “fiscal stimulus looks less bold, and we aren’t sure if [Bank of Japan Governor Haruhiko] Kuroda will ease further. It’s difficult to buy more from here.”
BoE’s Martin Weale surprise with dovish views
The Bank of England MPC member, Martin Weale, considered a hawk in the policy setting committee surprised with his dovish comments. Weale shifted his views, favoring “immediate stimulus” from the central bank after the release of the business confidence data from CBI on Monday. The quarterly CBI (Confederation of British Industry) industrial trends released yesterday showed that 52% of the firms surveyed were less optimistic about the general business situation than three months ago.
“I see things rather differently from what I would have done had we not had those numbers, and the material point is that they were collected after July 12, so after the initial shock of the referendum,” Martin Weale said. The sterling initially slipped on his comments, which comes just a few weeks after the policymaker held to his hawkish views.
Weale had previously suggested that the BoE must wait for more firm evidence of deteriorating economic sentiment before taking any action and also brushed aside the fact that the markets could be disappointed if there would be no BoE easing in August. “What I said last week is that I would like more information as well as more reflection, and I have had more information. Although you can’t say there’s a clear signal, if you spend all the time waiting for a clear signal, it never comes,” he said.
