Federal Reserve speakers on Wednesday include Bostic and MusalemNew Zealand rate pricing implies 25bp rate cut for October vs. 16 before RBNZ statementNZD/USD drops after the RBNZ statement – hints of a closer rate cutRBNZ leaves it cash rate on hold at 5.5%, as expectedChina June 2024 CPI +0.2% y/y (expected +0.4%) and PPI -0.8% y/y (expected -0.8%)People’s Bank of China sets yuan reference rate at 7.1342 (vs. estimate at 7.2711)ECB member and Bank of France Governor Villeroy is speaking on WednesdayQuick sketch of where to for the USD under Biden and TrumpJapan PPI (June 2024) +0.2% m/m (expected +0.4) and +2.9% y/y (expected +2.9%)Euro zone wage rises quickened in JuneOld news, but file this away just in case – how to get 5 more rate hikes from the Fed“Fed has no business lowering rates now … lost touch with economic reality”Goldman Sachs on US, “absolutely a soft landing”, Fed rate cut cycle to begin in September100bp of BoE cuts to come, leaves GBP “asymmetric risk to the downside than to the upside”Forexlive Americas FX news wrap 9 Jul: Powell’s testimony keeps easing door open for Sept.Oil – private survey of inventory shows a headline crude oil draw larger than expectedUS equities edge higher as Nvidia scores another gainTrade ideas thread – Wednesday, 10 July, insightful charts, technical analysis, ideas
The
two items of most interest during the session here were the inflation
data from China and the Reserve Bank of New Zealand monetary policy
Review for July.
The
RBNZ dropped a dovish bombshell. I explained it at the time (see bullets above):
***
From the RBNZ statement:
Committee
expecting headline inflation to return to within the 1 to 3 percent
target range in the second half of this year
If
that’s the case why wouldn’t we expect a rate cut soon? I think the
RBNZ agree, judging by this:
The
Committee agreed that monetary policy will need to remain
restrictive. The extent of this restraint will be tempered over time
consistent with the expected decline in inflation pressures.
The
TL;DR version of all this is ‘if inflation goes down, rates go down’.
***
The
interest rate and FX market agreed. NZD/USD dropped away after the
statement and rates markets moved to price in nearer-term rate cuts.
The Reserve Bank of New Zealand next meet in August (14th), markets
are close to pricing in a 40% chance of a 25bp rate cut at that
meeting. There is CPI data due from New Zealand next week – this will be a critical data point for the RBNZ in timing a rate cut.
From
China we had June inflation data. Headline CPI came in at 0.2% y/y
vs. the 0.4% expected and 0.3% in May. While it appears China is in
danger of flirting with a deflationary CPI again the core rate
offered some sign that’s not the case. Core came in at 0.6% y/y,
unchanged from May. The PPI, of course, remained in deflation. The
disappointment on the CPI has reignited calls for People’s Bank of
China easing. The yuan weakened on the session. USD/CNY hit its
highest (weakest for CNY) since November 14 last year.
Japanese
wholesale
inflation data
showed an acceleration
in
June. The
PPI (aka the corporate
goods price index (CGPI)) rose 2.9% y/y. The
yen-based import price index increased 9.5% y/y
in June, from 7.1% in May, a sign of how much impact the weak JPY is
inflating
the price firms
charge each other for imported raw material.
NZD/USD
fell on the day, as did the yuan and yen.
This article was written by Eamonn Sheridan at www.forexlive.com.
