FXStreet (Bali) – Another lively Asian session, with the New Zealand Dollar ending as the worst performing currency by a mile following the RBNZ interest rate cut – with dovish forward guidance provided – , while the US Dollar and the Australian Dollar were both the main winners, the latter being benefited by a stellar Australian jobs report.
RBNZ cuts interest rates, easing cycle begins
ANZ Economists shared their take on the RBNZ outcome, noting: “The RBNZ cut the OCR by 25bps today to 3.25%. The projections and commentary were extremely dovish. The lower terms of trade (think dairy prices) and higher supply-side capacity were key dynamics. The possibility of lower structural inflation is still on the table on top of shifting macro themes. The bottom line is that a lower NZD and interest rate cuts are necessary to get inflation back to 2% given other economic headwinds. The RBNZ’s growth numbers still look optimistic to us, and we expect at least one more cut before the end of the year, with 50% odds of a second.”
Australian employment figures beat estimates, but ABS flags some problems
Meanwhile, Australia’s employment figures came tripling expectations, with the total employment change at 42k vs 15k expected, 27.3k were part-time jobs and 14.7k full-time positions. The jobless rate was reduced to 6% vs 6.1% prior (revised from 6.2%), while the participation rate was unchanged at 64.7%. However, it is worth noting that the Australian Bureau of Statistics flagged some issues with the employment data obtained for the month of May, noting they saw an unprecedented surge in the raw employment numbers for Western Australia. That notification, coupled with anticipated strong US retail sales later today, was perceived as a slightly negative factor slowing the progress above 0.7770 ahead of 0.78 macro offers.
S&P affirms the US at AA+, outlook stable
After the NY close, the S&P rating agency affirmed the US at AA+, outlook stable, anticipating US growth at 2.4% this year and slightly below 3% in the years to come. The rating agency added that the Fed could raise rates in Q3 2015. Further commentswere published in early Asia.
Greece PM: Europe understands needs a solution to return Greece to growth
Greece PM crossed the wires in early Asia, following talks with Holland and Merkel, saying that he believes Europe understands needs a solution to return Greece to growth. Additional headlines, via Reuters, read “Greece PM Tsipras says discussions with Merkel, Hollande were in very good climate”, and “Greece PM Tsipras says he, Merkel and Hollande agreed to continue efforts to reach solution.”
US retail sales a key input to regain USD buying interest
Jacqui Douglas, Senior Global Strategist at TDS, had the following to say: “Momentum is beginning to build in the consumer spending activity, and we expect retail sales to post a substantial (and above consensus) gain in May with total spending rising at a very brisk 1.6% M/M pace. Strong auto sales and higher spending on gasoline should be the key drivers. We expect this report to reinforce the more constructive narrative on economic growth in Q2, pointing to further positive momentum in household spending – consistent with improvement in household sentiment and labour market activity in recent months.”
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