James Kim@Saxo
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Article / 11 August 2016 at 7:00 GMT

Morning Markets: RBNZ cut sends kiwi skyward

Head of Editorial Content / Saxo Bank

Morning Markets: Prices


  • US: Initial Jobless Claims (1230 GMT)
  • US: Bloomberg Consumer Comfort Index (1345 GMT) 

Yesterday, Saxo Bank head of fixed income strategy Simon Fasdal noted that the historic, inverted correlation between equities and bonds has broken down, with both asset classes broadly up.

Today, Europe opens its doors to a higher NZD after the kiwi soared by around 200 pips in the wake of a 25 basis point rate cut.

The market had obviously priced in this cut and perhaps a little more, but the spectacle of a currency spiking higher on a rate cut still serves to illustrate the strangeness and unpredictability of our zero-bound world.

Today we have US initial jobless claims at 1230 GMT, with the print set to receive a little extra focus in the wake of last Friday's nonfarm payrolls blowout. USD traders in particular will be looking for either confirmation of the employment rush or perhaps a sign that the numbers did not tell the whole story.

As we head into the European open, crude oil is struggling to find its footing after yesterday's EIA inventory data showed a rise of over one million barrels versus the 800,000 barrel decline that was expected.

Today's session may also prove pivotal for the Japanese yen, which lost some ground versus the USD overnight but is now being bought again. Japanese markets were closed for a bank holiday today.

Market signals

Asian session

  • RBNZ cuts official cash rate by 25 basis points to 2%
  • New Zealand's food price index fell 0.2% in July from a rise of 0.4% in June
  • Australia's MI inflation expectations came in at 3.5% in August against 3.7% in July
  • Japanese markets closed for bank holiday
  • Bank of Korea keeps rates on hold as expected at record low of 1.25%
  • UK housing activity ebbed after Brexit; the RICS index fell to 5 in July from 15 in June

Forex ahead

  • The NZD soared more than $0.01 after the RBNZ cut the official cash rate to 2%
  • The Aussie firmed above 0.77 versus USD, 2% higher in little more than a week 
  • NZD settles near yesterday's high following dramatic spike
  • USDJPY climbs by nearly 50 pips overnight; looks indecisive ahead of Europe open
  • USDCAD on the rise as WTI oil turns lower

From the Floor

Further headwinds. "Oil is back on the defensive after yesterday's EIA report," says Hansen.

Safe-haven. "A topside gold breakout could place $1,500/oz in sight," says Larsen.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

New filings for US unemployment benefits are on track to continue the run of positive news, with claims expecting to stick close to a 43-year low, says James Picerno.

Beyond the pale

Presidential candidate Donald Trump is simply too much of a loose cannon to be trusted with the highest office in the United States, says Martin O'Rourke.

NZ cut not enough?
The market was disappointed that the RBNZ cut its official cash rate by only 25 basis points, writes the Saxo APAC Sales Trading team.

Corruption consensus
One party is prepared to negotiate with Spain's acting PM to form a working government if a reform package that looks at anti-corruption measures is addressed, explains Stephen Pope.

Mass movements

Markets don't flow randomly, and volume data often give a good read on the nature of a given move and the trading strategy that best applies, says fxtime.

Fiordland National Park, New Zealand

Uncharted territory: The RBNZ rate cut saw the NZD surge upwards as policy moves accrue new meaning in the wake of widespread global easing. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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