RBNZ Keeps Rate Unchanged, Inflation Numbers In Focus

RBNZ

During the early hours of the Asian morning today, the main event on the economic calendar was the RBNZ interest rate decision and the accompanying monetary policy statement. As discussed in our Strategic Report, delivered every Monday, at its latest meeting, this Bank kept interest rates unchanged at +0.25%, and although we have been expecting an optimistic language, the statement was even more hawkish than what we (and apparently many other market participant) have been anticipating. Officials announced that they will end their Large-Scale Asset Purchase (LSAP) program the week after the meeting, while data since then have been on the bright side, with the better-than-expected employment report for Q2 cementing expectations over a rate hike at this gathering. During today’s monetary policy statement, the Bank stated that:

NZD/JPY — Technical Outlook

NZD/JPY continues to trade below a short-term downside resistance line taken from the high of August 11th. That said, after finding support near the 75.20 hurdle this morning, the pair rebounded and is now trying to go for a larger recovery. If the rate stays somewhere below that downside line, we will continue aiming lower.

UK, EU and Canada Inflation

Traders, especially those who trade GBP, were busy during the European morning with the data from the UK. The country released the long-awaited inflation numbers. The initial forecasts for the core and headline YoY figures for the month of July were on the lower side, as they were believed to fall below the previous readings. The actual numbers came out even lower, failing to meat their initial expectations. The core YoY CPI showed up at +1.9%, when the forecast was for +2.2%. The Headline YoY CPI came up at +2.0%, when the expectation was for a +2.3%. The Bank of England’s current inflation target sits at 2.0%. Initially, the British pound reacted negatively to the news, however stabilized slightly after a while.

EUR/GBP — Technical Outlook

After reversing north on August 10th, EUR/GBP continues to slowly grind higher, while balancing above a short-term tentative upside support line taken from the low of August 11th. The rate is currently sitting near the 200 EMA and slightly below yesterday’s high, at 0.8536. In order to consider higher areas, we would prefer to wait for a break above that hurdle first, hence our somewhat positive approach for now.

As For The Rest Of Today’s Events

From the US, we get the minutes from the latest FOMC gathering, but bearing in mind that we’ve heard the views of several policymakers since then, as well as that we will get to hear from Chief Powell this week, we will treat this release as outdated this time around. Market participants are likely to hold on to the positions adjusted in the aftermath of Powell’s speech on Tuesday. As for the US data, we have building permits and housing starts, both for July. Building permits are expected to have increased somewhat, but housing starts are anticipated to have sightly declined.

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