RBNZ to Raise Rates to 3.0% Today

AUD

The AUD had a mixed performance overnight as markets grappled with Monday's weak Chinese economic data. Asian equities closed largely in the red on Tuesday’s close, with the Hang Seng the worst performer down 1%. The ASX outperformed its peers finishing up 0.6%, with materials leading the gains up 1.7%, with BHP posting record annual earnings. Commodities were also mixed with Gold down and Iron Ore up. To the data today, Australia’s Q2 wage price index will be released and is unlikely to show noticeably stronger growth in hourly wage rates. In its most recent Statement on Monetary Policy, the RBA estimated +2.6% y/y. According to household surveys, wage growth was moderate with only a few workers reporting that their income had increased. There is potential for volatility over the next 30 hours with plenty of major data releases due from around the globe including RBNZ interest rate decision (see below) and tomorrow morning's local Employment Report.

USD

AUDUSD has been ranging overnight, opening this morning almost exactly where it started yesterday at 0.7021. Mixed results for US equities overnight with the NASDAQ down 0.2%, the S&P 500 +0.2% and the Dow Jones +0.7%. US 2 year yields climbed 7bps to 3.26% while Crude Oil fell a further 3.1% to $86.60 a barrel. To the overnight data, and Housing Starts for July missed expectations, whilst Building Permits were better than forecasts. Released a little later, July Industrial Production rose 0.6% MoM to beat forecasts of 0.3%. Looking ahead to tonight's data, and Retail Sales data for the US is also out today and strong payrolls and wage growth in July could support figures. Auto sales are also likely to have provided a boost as volumes were up ~3% m/m. While headline nominal Retail Sales should face headwinds from the pullback in gasoline prices that occurred throughout July.

EUR

AUDEUR was also looking for direction, trading a 45 pip range and opening close to flat at 0.6902 this morning. European equities closed higher on the day with the CAC +0.3% and DAX up 0.7%. Natural Gas prices were up 7% which adds some heat to the ongoing European gas supply issues. The German ZEW Economic Sentiment for August printed at a dismal -55.3, missing expectations of -52.7 and the Economic Sentiment data from the EZ as a whole fared even worse at -54.9. Capping off what was a night of disappointing data for  Europe, the European Trade Balances missed the mark by a long way, showing a deficit of 30bio , about 30% worse than expectations.. Looking ahead and the Eurozone has notable events coming up this evening including employment and GDP q/q data.

GBP

AUDGBP saw a high of 0.5839 overnight before erasing all gains and more, opening lower at 0.5800 this morning. In early data, the UK Unemployment Rate was unchanged at 3.8% for June. The number of job vacancies in the UK fell for the first time in 2 years, while ‘real’ pay (adjusted for inflation) fell by a record 3% in the quarter to June. Of interest to the Bank of England will be July inflation data which will be released later this evening and is likely to show another strong print. It is expected CPI inflation figures to jump to 9.8% in year-ended terms after reaching 9.4% last month, driven by strong food, services and energy prices. Core inflation is also expected to rise further as underlying price pressures show little sign of easing. 

NZD

On the contrary AUDNZD gained strength overnight reaching highs of 1.108 and opening only shy of this at 1.1065. This morning's Kiwi PPI input and output both printed above expectations which could indicate prolonged inflation at the Consumer level over coming months. In what is the main event today, the RBNZ have their policy meeting at midday which will be watched very closely by markets, including for any signs that the early-moving RBNZ is starting to inch closer to a slower pace of rate hikes. It is anticipated yet another 50bp hike, taking the OCR to 3.0%. As always, markets will watch for changes to the published OCR track which previously peaked at close to 4% before tracking lower to 3.5% by mid-2025.