Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

RBNZ Set For Lift-Off

By MarketPulse (Jeffrey Halley)Market OverviewAug 04, 2021 05:33AM ET
RBNZ Set For Lift-Off
By MarketPulse (Jeffrey Halley)   |  Aug 04, 2021 05:33AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

New Zealand Unemployment Outperforms

New Zealand Unemployment dropped to 4.0% for Q2 this morning, a stunning result given that market expectations were 4.50%. That should be the green light for the RBNZ to hike by 0.25% on Aug. 18, with all four major New Zealand banks predicting three rate hikes in total for the rest of the year.

New Zealand will join a very small group on the normalizing path, and at this stage, only the arrival of the COVID-19 Delta-variant in the community would derail that outlook. Predictably, the New Zealand dollar has rallied 0.50% versus the US dollar and is higher versus the yen and Australian dollar, etc. I expect the kiwi to outperform going forward.

Yesterday the Reserve Bank of Australia sprung a surprise, refusing to blink in the face of the Delta variant popping up far and wide across Australia (it arrived in Cairns yesterday) and staying on its tapering track. That has limited the fallout in the Australian dollar, although if the lucky country is still in the same place at the end of September, as it is today, those forecasts may have to change.

Today also sees the latest Bank of Thailand policy decision with Thailand in a very different place to the lands down-under. With the economy wilting under the Delta-variant onslaught and inflation very near the bottom of the BoT’s 1.0%-3.0% range, rates should remain at the 0.50% record lows.

The BoT has precious little wiggle room on the monetary policy front, which is likely to be ineffective anyway, with fiscal policy required for the heavy lifting. The Thai baht remains near 17-month lows and will remain a leading member of my Asian fragile four.

On that note, another member, the Indonesian rupiah, has rallied impressively over the last few days. USD/IDR falling from near 14,600.00 to 14,300.00 this morning as COVID-19 cases fell. But don’t be fooled; cases have moved lower in step with rapidly falling testing, while deaths have remained consistent at around 1500 per day.

Cases shot up yesterday as, you guessed it, testing increased. Indonesia has firm commodity prices and a modest recovery in domestic demand to fall back on, making its outlook better than Thailand’s. Any rally by the Indonesia rupiah is one to sell into until Indonesia starts winning its virus battle.

Over in China, the spiritual opium comments regarding online gaming sparked a panic sell-off in the likes of Tencent (OTC:TCEHY) yesterday. Clearly, the financial market's definition of what it thinks the Chinese government considers targeted clampdowns and the government’s actual definition remain poles apart.

China popped in an inquiry into automotive semiconductors into the mix yesterday as well, as the hunt for commodity hoarders goes on. The buy-the-dip herd continues to confuse optimism with reality. The regulatory discount on China equities versus being so cheap now it doesn’t matter still has some way to go.

On the subject of China, readers should monitor the COVID-19 situation there. Today’s Caixin Services PMI outperformed, signaling that domestic demand continues to improve. However, with albeit small numbers of cases popping up in multiple locations, a rapid deterioration in the situation could lead to some repricing of China growth, with the Manufacturing PMIs already signaling a slowing pace. You wouldn’t bet against the Chinese authorities’ ability to nip the outbreaks in the bud, but more than previous versions, the Delta-variant has a whack-a-mole look to it, as Australia et al have found.

Europe and the US release services and composite PMIs today, but the most attention is likely to be on US ADP Employment and ISM Non-Manufacturing Prices. The ADP data has been a poor indicator for the Non-Farm Payrolls of late, but markets will reprice Non-Farm expectations if the ADP deviates in a significant way from the 700,000 jobs expected.

Similarly, the ISM Non-Manufacturing Prices will probably have the inflationistas wringing their hands if it prints well north of last month’s 79.5. Will that shake the bond market out of its lethargy? I doubt it. But a low number will almost certainly see US long-dated yields move lower once again, which could see US dollar selling emerge.

Original Post

RBNZ Set For Lift-Off

Related Articles

RBNZ Set For Lift-Off

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email