RBNZ Monetary Policy On Show Today
AUD
The AUD had a rather flat overnight performance across the board, either trading equal or slightly lower than yesterday. US Equities took a step back after the release of some soft US Consumer Confidence data, however US 10-year Yields fell 5bps to 1.555%. Both of which work in opposite directions for the AUD, likely explaining the relatively flat performance for the AUD. Commodities had a mixed overnight session with Iron Ore recording 0.9% and Copper coming in at -0.4%. This further explains the AUD’s flat movements. With the rise of Covid Cases in Melbourne and an increase in fear, markets could become pessimistic towards the AUD causing it to drop. Investors will likely be watching the evolving situation closely to gauge their next move. The recent rise in cases could also push the Australian government to increase the speed of the vaccine roll-out. A quiet day for the AUD, with just some construction data scheduled to be released.
USD
The AUD/USD trading relatively flat compared with yesterday’s levels, currently trading in at 0.7752 at time of writing. Both the S&P500 and NASDAQ were down 0.3% and 0.2% after the release of some poor US Consumer Confidence data, which came in at 117.2 (vs exp 118.8).The USD held firm after the FHFA House Price Index and the Case Shiller House Prices both beat expectations coming in 1.4% MOM (vs exp 1.0%), and 1.60% MOM (vs exp 1.30%) respectively. Fed’s Clarida furthered the common trend of Fed officials, stating that the Fed was ready to control inflation if it is required and that talks about tapering could arise in upcoming meetings. The Fed is becoming more and more vocal in regards to possible tapering policies, and as this trend progresses we could see some more significant market movement. Market eyes turn to tomorrow night with Prelim Quarterly GDP data scheduled to be released.
EUR
The AUD/EUR trading slightly lower than yesterday’s levels, currently trading in at 0.6327 at time of writing. European equities had a modest session, with the Eurostoxx rising 0.4%, which may have tipped the scales in the EURs favour. Europe has labelled Alexander Lukashenko, the president of Belarus, as Europe’s Last Dictator, after he forced a passenger flight to land in Minsk in order to arrest a journalist on board. Turmoil could stir if society decides that Alexander’s 26 year rule should come to an end. ECB’s Villeroy stated that the ECB had ample tools to persist in a loose policy to allow inflation to rise above 2% for some time, as there was no risk associated with a lasting return to inflation. Such a statement may have an impact on investors’ perception of what the ECB has planned for future policies, and as more information arises could trigger significant market movement. Not much data scheduled for the rest of the week, with just French Prelim Monthly CPI and Quarterly GDP scheduled for Friday.
GBP
The AUD/GBP also trading relatively flat, currently coming in at a rate of 0.5478 at time of writing. The UK government has been accused of trying to implement “stealth” measure lockdowns to counter the emergence of several Indian-strain Covid variant hotspots. If the UK’s Covid situation worsens, we could see negative movements in risk sentiment. The GBP is looking at a quiet week, with no significant data scheduled to be released.
NZD
The AUD/NZD trading slightly lower than yesterday’s levels, currently trading in at 1.0731 at time of writing. With the rising cases in Melbourne, New Zealand has paused its travel bubble with Victoria. Further pauses could arise if Melbourne’s worsening situation spreads throughout Australia. The Reserve Bank of New Zealand (RBNZ) MPC finally meets today, investors expect the continuation of a dovish tone with the maintenance of current stimulatory monetary policy, however there could be an improvement in the RBNZ’s unemployment rate profile, which previously was far to pessimistic. Market movement could occur if the tone conveyed is far different from market expectations.