- Sterling slides on Martin Weale’s comments and warning of RBS
- NZ trade surplus narrows
- Australian interest rates depend on inflation data tomorrow
FX Market Overview
Sterling fell overnight after RBS sent a message to its customers warning of the possibility of negative interest rates. It is a strange and probably a political maneuver before the meeting of the Bank of England next week. However, considering the fact that Mark Carney has expressed his distaste for negative rates, it is perhaps a little too preventive.
Member of the Monetary Policy Committee Martin Weale has changed its stance towards further monetary stimulus, although I’m not sure that would favor charging banks to deposit funds in the BOE. I suspect that the pound will recover some of those losses, but to be nervous before the meeting of the BOE and, before that, we will get the data for economic growth in the UK for Q2 tomorrow.
The trade balance of New Zealand was not as positive as many had expected. NZ $ 127 million were below the figures for May and below market expectations as imports and exports fell. That has rekindled expectations of rate cuts from the Reserve Bank of New Zealand and would have weakened the New Zealand dollar against the British, if not by dipping Sterling. In the end, the GBPNZD rate fell overnight along with other currency pairs based GBP.
Across the Tasman Sea, the Reserve Bank of Australia is on tenterhooks ahead of inflation data tomorrow. The market consensus is for a quarterly growth rate of 0.4%, but anything less than that is almost certain to trigger an RBA rate cut. Obviously, the opposite is also true and the strongest growth could prevent any moves from the RBA at the moment. Even without these data, there is a 70% chance of a rate cut next Tuesday. The Australian dollar, as the New Zealand dollar is stronger against the British besieged this morning.
This afternoon brings consumer confidence and new home sales; both crucial for decision making by the Federal Reserve. In the current uncertainty, it would be very strange for consumer confidence not having taken a little beat, but forecasters are very unclear about the state of the housing market. So there are many possibilities of USD volatility currently trading below; after 15:00 UK time.
And I’m very jealous of the Cornish people that you get to see the mechanical miner 30 feet making the journey 130 miles from Tavistock to Pendeen to celebrate the mining heritage of Cornwall and 10 years of this area being listed by UNESCO as heritage of humanity. He looks amazing.