Forex news from the European trading session - 17 August 2021
Headlines:
- Japan extends state of emergency until 12 Sept, seven more prefectures included
- Eurozone Q2 GDP second estimate +2.0% vs +2.0% q/q prelim
- RBNZ likely to keep OCR unchanged tomorrow - ASB
- No RBNZ rate hike coming tomorrow - Westpac
- NZ PM Ardern confirms country to go into Level 4 lockdown for three days
- NZ PM Ardern: Not sure yet if Auckland COVID-19 case is delta variant
- UK July jobless claims change -7.8k vs -114.8k prior
Markets:
- CHF leads, NZD lags on the day
- European equities lower; S&P 500 futures down 0.3%
- US 10-year yields down 3 bps to 1.227%
- Gold up 0.3% to $1,792.33
- WTI down 0.8% to $66.78
- Bitcoin up 1.8% to $46,927
The kiwi is the big mover on the day as New Zealand enters into a fresh nationwide lockdown, after a new COVID-19 community case was found in Auckland.
That puts a dampener ahead of the RBNZ policy meeting tomorrow, with rate hike expectations being dialed back. NZD/USD was already withering at the lows around 0.6950 at the tail-end of Asia Pacific trading, before extending a drop to 0.6908.
AUD/USD was also brought lower inadvertently, with the aussie not helped by the more dour risk mood and also as the RBA minutes revealed that policymakers may potentially delay the taper timeline beyond next month.
The pair traded around 0.7310 to start European trading before falling further to fresh lows for the year at 0.7280 but is clinging on to daily support at 0.7289 now.
Delta variant concerns are still playing a key role in keeping the risk mood more subdued, as US futures are marked lower alongside European indices as well.
Adding to the New Zealand headlines is Japan officially extending (and expanding) state of emergency measures to 12 September.
The bond market is also keeping with the turnaround since Friday, with 10-year yields tracking lower by roughly 3 bps to just under 1.23%. That said, USD/JPY is holding up around 109.20-30 as buyers keep away from a test of 109.00 for the time being.
Elsewhere in FX, the franc is leading gains with USD/CHF down 0.2% near 0.9100 while the pound is also a notable laggard as GBP/USD falls below 1.3800 and nears a test of its 200-day moving average at 1.3776 as the dollar keeps more resilient.
