Forex news for Asia-Pacific trading on August 18, 2021:
- RBNZ official cash rate 0.25% vs 0.50% expected
- Orr: RBNZ is keeping rates at 0.25% 'for now'
- New Zealand covid cases rise to 7. Outbreak came from Australia
- Australia Q2 wage price index +0.4% q/q vs +0.6% expected
- China sets yuan mid-point at weakest level since July 29
- China reports 6 new local coronavirus cases vs 17 a day earlier
- Japan July trade surplus 441B vs 202.3B expected
- US June machinery orders -1.5% m/m vs -2.8% expected
- New Zealand Q2 PPI output +2.6% q/q vs +1.2% prior
- Weekly US oil private inventories show draws in oil and gasoline
- Fed's Kashkari: I believe these will be short-lived high inflation readings
- More from Kashkari: End of this year or early next year are reasonable timelines for taper
- India begins selling oil from strategic reserves in policy shift
Markets:
- Gold up $4 to $1790
- US 10-year yields up 1.4 bps to 1.27%
- WTI crude up 9-cents to $66.68
- Nikkei up 0.9%
- S&P 500 futures up 0.1%
- NZD leads, JPY lags
It was a lively session in the build up to the RBNZ decision. Uncertainty was at maximum levels after a covid case yesterday followed by six more cases and a lockdown today threw a nearly-certain rate hike into total uncertainty.
NZD had crept up off the 0.6900 floor ahead of the decision, perhaps on some position squaring but then the news it and it crashed through teh July low to the worst levels in 9 months. However there just weren't the stops you'd expect to see there and after tagging a low of 0.6865 it climbed back above 0.6900.
As I wrote at the time:
If the kiwi doesn't sustain a break below 0.6900 on a surprise rate decision, 5 new covid cases and the top health official saying they expect 50-100 cases, then what could possibly sink this pair?
That was followed by Orr, who struck a supremely confident tone and characterized the pause in rates as something akin to a blip. His comments on housing and similar comments in the statement certainly raised some eyebrows but he was overwhelmingly upbeat and that sent NZD/USD to a session high at 0.6951 in a total turnaround.
More broadly, the sentiment in increasingly positive as well with Japanese stocks off to a strong start, Treasury yields higher and the yen slipping across the board. So it goes with the delta ebb and flow.
