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10 Jun 2015
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Kiwi slumps as the RBNZ cut interest rates

United States Dollar: It was another volatile trading session yesterday. To start with, Bank of Japan Governor Kuroda was speaking in parliament and referring to the value of the Yen, said “generally and theoretically speaking, the fact that the real-effective exchange rate has come this far means that it is unlikely to move further in the direction of yen weakness”. This took markets a bit by surprise – investors have been grappling for some time with the central bank’s true view on recent Yen weakness. USD/JPY tumbled from 124.00+ to 122.50 on the back of these comments, which in turn saw the dollar fall across the board. At the same time, German 10 year yields continued to push higher through the 1% level and EUR/USD went higher. GBP/USD was a benefactor and pushed upwards through 1.55 to a high of 1.5550. Of course, the Greek story has continued to play out but ultimately no deal is yet done. Also, last night both UK Chancellor Osborne and BoE Governor Carney were speaking at the annual Mansion House dinner. The crux of Osborne’s speech was around the sell-off of RBS whilst Carney disappointed markets eager to get his latest views on monetary policy – he barely made mention of it. Although GBP/USD has fallen back under 1.55, it’s holding steady at the top end of its most recent range and opens at 1.5450.

We expect a range today in the GBP/USD rate of 1.5320 to 1.5550

Euro: EUR/USD whipped around yesterday morning. It topped out at 1.1367 and dropped to a low of 1.1272 within the space of an hour or so as bond markets and rumours and remarks on Greece got traders a bit jumpy. USD/JPY was offered throughout the morning which had an impact on EUR/USD too. Late night talks were taking place in Brussels last night between Merkel, Hollande and Tsipras. So far, they’ve all agreed to intensify negotiations with creditor’s, which is good news to a point, but there’s still little to suggest a deal is close to being struck and as such the euro is falling this morning – it opens at 1.1260 vs. the USD. GBP/EUR is back up through 1.37 and trades at 1.3720 currently, with the single currency generally weaker against a range of currencies right now.

We expect a range today in the GBP/EUR rate of 1.3650 to 1.3790

Aussie and Kiwi Dollars: The RBNZ announced a 0.25% cut in interest rates overnight, a decision that wasn’t entirely expected. In fact, it was a 50/50 bet. The kiwi gapped from .72 to .7010 and remains on the back foot in London at .7015. It was the first cut in four years and Governor Graeme Wheeler went on to say that “we expect further easing may be appropriate”. Despite surging Auckland house prices, falling dairy prices, slowing growth and other factors means inflation is currently under the central bank’s target. Across the Tasman, Australian employment numbers were released – they were strong and a lot better than market forecasts. The aussie dollar bumped higher on the release and AUD/USD gapped from .7710 to .7780. AUD/NZD has naturally rocketed following both events. Meanwhile, the kiwi is lower across the board and GBP/NZD is up over 2.20 this morning.

We expect a range today in the GBP/AUD rate of 1.9850 to 2.0050

We expect a range today in the GBP/NZD rate of 2.1850 to 2.2100

Data Releases

AUD: No data

EUR: No data

GBP: No data

NZD: Business NZ Manufacturing Index, FPI m/m, REINZ HPI m/m

USD: Core Retail Sales m/m, Retail Sales m/m, Unemployment Claims, Import Prices m/m, Business Inventories m/m

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