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The RBNZ Stands Pat, as Markets Continue to Find Relief from the June PMIs

Bob Mason

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar on Wednesday. The RBNZ and the Kiwi Dollar were in action in the early part of the day.

With no material stats to consider, concerns over another thee spike in new COVID-19 cases returned, though overshadowed by optimism over the economic outlook.

Looking at the latest coronavirus numbers

On Tuesday, the number of new coronavirus cases rose by 158,646 to 9,329,404. On Monday, the number of new cases had risen by 126,214. The daily increase was higher than Monday’s rise and up from 156,317 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 952 new cases on Tuesday, which was equal to 952 new cases on Monday. On the previous Tuesday, just 767 new cases had been reported.

From the U.S, the total number of cases rose by 34,399 to 2,420,920 on Tuesday. On Monday, the total number of cases had risen by 29,864. On Tuesday, 16th June, a total of 26,844 new cases had been reported.

For the Kiwi Dollar

The RBNZ held interest rates steady at 0.25% this morning, which was in line with market expectations.

Salient points from the Rate Statement that preceded the RBNZ Press Conference later this morning included:

  • The Committee agreed to continue with the LSAP program set at NZ$60bn and fore the cash rate to remain at 0.25%.
  • Global restrictions rolled out to mitigate the spread of COVID-19 provoked a severe downturn in the NZ economy.
  • Committee members have yet to see a full set of evidence to determine how the pandemic is affecting the economy. Members did agree, however, that the June quarter would show a substantial decline in economic activity.
  • Economic risks remain to the downside despite some high-frequency data suggesting the demand has increased since the end of Alert Level 2 Restrictions.
  • Uncertainty also remained over the extent of the continued job losses and reduced activity.
  • Much will depend on how willing households and businesses are to spend or invest in the current environment.
  • Member noted that the move to Alert Level 1 arrived sooner than previously assumed supporting an earlier than expected rise in spending.
  • It was also noted, however, that these positives could be short-lived.
  • The Committee agreed that it is not yet clear whether the monetary policy stimulus delivered to date is sufficient to meet its mandate.
  • Reserve Bank staff will provide a more detailed briefing on financial stability for the August monetary policy decision.
  • Staff is also working towards ensuring a broader range of monetary policy tools that could be deployable in the coming months. These would include a term lending facility, reductions in the OCR, and foreign asset purchases, and the appropriate quantum of the LSAP.

The Kiwi Dollar moved from $0.64951 to $0.64763 upon release of the rate statement. At the time of writing, the Kiwi Dollar was down by 0.06% to $0.6487, with the RBNZ press conference up next.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.02% to ¥106.50 against the U.S Dollar, with the Aussie Dollar up by 0.33% to $0.6953.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Germany’s IFO Business Climate Index figures are due out early in the European session.

The figures have a tendency to influence the EUR and there will likely be plenty of interest in the headline figure. Expect the Business Expectations Index to also influence, however. This will give the markets some idea of what kind of business investment and hiring to expect near-term.

At the time of writing, the EUR was up by 0.15% to $1.1325.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of market risk sentiment and any updates from Brexit negotiations.

At the time of writing, the Pound was up by 0.07% to $1.2529.

Across the Pond

It’s also a particularly quiet day ahead on the U.S economic calendar. There were no material stats due out of the U.S, leaving the Dollar in the hands of the news wires on the day.

Trump and updates on new COVID-19 cases will remain a key focal point for the markets near-term.

At the time of writing, the Dollar Spot Index was down by 0.06% to 96.585.

For the Loonie

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of the weekly API and EIA crude oil inventory numbers and daily COVID-19 figures.

While risk appetite improved following the latest PMI numbers, any talk of lockdown measures in the U.S or the EU would weigh heavily.

At the time of writing, the Loonie was up by 0.04% to C$1.3544 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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