Daily Forex News

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JPY/NZD Weekly Fundamental Forecast: RBNZ Hike May do Little for NZD

JPY

Divergence is increasing on Yen future prices and market positioning. Yen is at it’s 24-year low, net-short exposure is at its least bearish level since March 2021. Over 27k gross shorts were closed over the past two weeks, with 8.5k gross longs added to it. Gross longs are also at their most bullish level since the pandemic. And this suggests that traders do not believe the Bank OF Japan will retain their ultra-easy monetary policy for as long as the central bank suggests. But it also means that prices could be too low relative to market positioning, or market positioning has jumped the gun and may need to reserve course. As divergences between prices and market positioning rarely last for too long.

NZD

NZD futures are on the cusp of flipping to net-long exposure for the first time since April. Admittedly it was only net-long for a single week but it does at least show the appetite to be short in almost non-existent, with net short exposure sitting at -276 contracts.

Read More : https://www.xtreamforex.com/jpy-nzd-weekly-fundamental-forecast-rbnz-hike-may-do-little-for-nzd/

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August RBNZ Preview and what next for the NZD/USD

It is widely expected that the Official Cash Rate will be raised by 50 bp taking the cash rate to 3% in tomorrow’s meeting of Reserve Bank of New Zealand. It will be the RBNZ’s fourth consecutive 50bp hike in a tightening cycle that started in October.

RBNZ committed to make sure consumer price increase returns to within 1 to 3 percent target range last month and said that it would continue to increase rates on a speed to maintain price stability.

Despite a slight increase in the unemployment rate to 3.3% in second quarter of 2022 the labour market remains tight beyond the maximum sustainable level and inflation at 7.3% y/y is miles above target. The RBNZ will likely revise higher inflation forecasts and reiterate its forecast for a terminal rate of 3.9% by mid-2023.

The NZDUSD increased 3.4% last week to close above 0.6450 for its best week since June 2020. However, following the latest bout of dour Chinese economic data released yesterday, the NZD/USD has given back just under half of those gains to be trading at 0.6358.

Read More : https://www.xtreamforex.com/august-rbnz-preview-and-what-next-for-the-nzd-usd/

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Bank Of Canada Inflation on it’s Peak

Bank Of Canada deputy governor said that obvious inflation is high but it is still far form being too high.

Despite CPI has fallen to 7.6% y/y from 8.1% and core CPI is down to 6.1% from 6.2% y/y, the Canadian dollar was higher on the day but it also depends on which metric we are looking at, as two out of the three inflation measures the BOC’s prefer the increase. Common CPI hit the record high and also upwards from June.

Common CPI increased to 5.5% from 4.6%. CPI median rose to 5% from 4.9%y/y. CPI trimmed mean fell to 5.4%y/y from 5.5%. Core CPI increased to 0.5% m/m from 0.3%.

Read More :https://www.xtreamforex.com/bank-of-canada-inflation-on-its-peak/

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GBP, Conservative Party Elections

The political backdrop, candidates and expected policies for traders to watch around next month’s UK Conservative Party leadership election, who will be the UK’s next PM ?.

Traders generally overestimate the impact of political move’s on market, however, politicians often have to water down their proposals to get them passed through the rest of the government apparatus and the majority of factors that drive markets on a day to day basis sit well outside the realm of politics. The bigger influence on markets is from International trade, monitory policy, supply chains, business confidence and complex interactions of millions of traders across the globe.

Read More : https://www.xtreamforex.com/gbp-conservative-party-elections/

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EUR/USD Plunging Into Parity as US Dollar

Pair is moving around 1.0100-1.0270 channel for three weeks now. All attempts of the break through to its upper or lower border ended in failure. These attempts continued until 10th August after the publication of data on inflation in the US, the pair went up, turning the level of 1.0270 from resistance into Support. However, it was for a short while of two days and the pair returned to the channel, broke through its lower border on Thursday, and ended the week at 1.0039.

The dollar and the euro approached the equality level of 1.00000 again. The two reasons for the reversal of the pair are, drop in the market’s risk appetites and inflation/energy crisis in Europe. The consumer price index rose there in annual terms crisis caused by the sanctions imposed on Russia because of its invasion of Ukraine.

Read More : https://www.xtreamforex.com/eur-usd-plunging-into-parity-as-us-dollar/

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USD CNH | US Dollar Chinese Yuan Offshore

The comment from Fed officials last week helped USD to surge and the expectations of 75bps rate hike on the next meeting which will be on 21st September. Last week there was a discussion of Fed officials about how it is premature to worry about the economy falling into recession and how they need to completely convince inflation coming down before stopping interest rate hikes.

China reported some unexpected data last week. Industrial production for the past month decreased to 3.8% YoY vs 4.6% which was expected. Retail sales for the last month decreased to 2.7% YoY and expectation was 5% YoY. As Covid issues continue, increasing drought conditions and worries of a collapsing housing market, the Public Bank Of China decreased its 1 year loan prime rate to 3.65% which was 5bps. The central bank then went on and said that it plans to spend $29 billion in special loans to troubled developers. However, the central bank will still have more to go if it plans on saving the dire housing market.

Read More : https://www.xtreamforex.com/usd-cnh-us-dollar-chinese-yuan-offshore/

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GBP/USD – British Pound Jumped US Dollar

British pound jumped 0.82% yesterday, as the currency has rebounded from its worst week of the year. GBP/USD went down 2.53% last week, as the USD has found strength after weeks of beating a retreat. GBP/USD climbed yesterday after US New home sales dropped to 511 thousand in July, down from 585 thousand in August which is well below expectations.

The UK Manufacturing PMI crashed into contraction territory in August. The index fell to 46.0, down from 52.1 in July and shy of the estimate of 51.1. The dismal reading is part of a pan. European downward trend in manufacturing, which has been made worse by the prolonged war in Ukraine. Output has been an obstacle by higher costs, a drop in demand and supply chain problems.

There was better news from Services PMI, which was almost unchanged at 52.5, pointing to weak expansion. Still, it’s hard to see how the UK can avoid a recession with weak growth and increasing inflation. Business expectation is dropping, and that will likely lead to a cutback in spending, hiring and investment, which won’t help the economy one bit.

Read More : https://www.xtreamforex.com/gbp-usd-british-pound-jumped-us-dollar/

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NZD First Impressions: Retail Trade

The volume of goods sold fell by 2.3%. That is lower than the forecast for muted 0.3% rise, and well below the average analyst forecast for a 1.7% gain.

Today’s fall follows a 0.9% drop in spending in first quarter, leaving spending volumes down 3% through the first half of the year. Spending in core categories in down 2%.

Looking under the surface, households have been winding back their spending on durable items like electronics and furnishings. There has also been a fall in vehicle sales. Those are the same categories where spending rose strongly when Covid-19 first arrived on our shores and measures to protect public health prompted a shift away from spending on services.

Now that health restrictions have been rolled back, and with the opening of the borders allowing tourists back in the country, there is increased spending on hospitality and accommodation services. However, the increases have not offset the reduced spending in other areas.

Many households have been shielded from the impact of interest rate increases to date due to the high level of mortgage fixing in the New Zealand market. Over the coming months, debt servicing costs will rise sharply for many households as they refix at higher interest rates. And coming on top of today’s soft result, that points to weak spending through the back part of the year.

Read More : https://www.xtreamforex.com/nzd-first-impressions-retail-trade/

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Additional China stimulus helps stimulate the Aussie

After problem in the housing market and a recent bout of poor data from China, including weak retails Sales and Industrial Production, China has implemented several polices to help the beleaguered sectors. Earlier this week, China announced plans for $29 Billion in special loans to help troubled developers in the housing market. In addition, it cut loan prime rates, China announced 19 additional policies to help the economy, worth $146 billion. These policies will primarily support infrastructure projects. However, although these may be positive steps towards helping housing and infrastructure, will it be enough to help the broader economy ?

One currency that has seemed to get a bid on the back of the China news is the AUD. EUR/AUD has made a Year to Date high on 4th February near 1.6226 and quickly began a decent lower. Two months later, on 5th April the pair made a low of 1.4320 as the Euro sold off due to lack of commitment by the ECB to raise interest rates. EUR/AUD then bounced just above the 50% retracement level from the 4th Feb highs to 5th April lows, near 1.5273, in an ascending wedge formation. The pair spiked through horizontal resistance at 1.5354 and resumed the prior trend lower, breaking below the ascending wedge on 7th July near 1.4975. The target for the breakdown of an ascending wedge is a 100% retracement.

Read More : https://www.xtreamforex.com/additional-china-stimulus-helps-stimulate-the-aussie/

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Australia Retail Sales Growth at 4-Month High

The ABS initial estimates of official retail showed a much stronger than expected 1.3% gain in July. That compares to a low rise of 0.2% in June and marks the strongest monthly gain since March. The consensus forecast was of a 0.3% rise The detail shows a broad-based lift with nothing to suggest the monthly gain is a rogue. Rising retail prices undoubtedly account for a sizeable part of the rise, with volumes likely to have been somewhat flatter.

Recall that the ABS retail release now comes in two stages, an early preliminary release with limited detail and a final estimate that may see some revisions and provides the full range of additional detail.

The limited detail available for July shows a strong rebound for department stores and a strong gain for clothing and footwear, with robust rises for cafes and restaurants and basic food. The only soft spot was around household goods which saw a second consecutive monthly decline, down 1.1%mth. That weakness may be a sign that housing-related and big ticket durables spend in contracting but the rest of the detail suggests this is being more than offset by strong gains in both small ticket discretionary categories and essentials.

Read More : https://www.xtreamforex.com/australia-retail-sales-growth-at-4-month-high/