With our focus on risk trends, we have to identify the potential catalysts for broad sentiment. This is a more difficult task this week than it was for the last. We had a relatively straightforward set of events (the US NFPs, a Spanish debt auction and the expiration of the ECB’s 12-month lending facility); but this time around, the milestones are nearly as remarkable. The ECB and BoE rate decision could bring policy changes; but that is unlikely. There is another one-week lending facility from the ECB that will be used to verify whether the 112 billion euros drawn this past week was just a stop gap for the longer-term programs expiration. Scheduled economic releases don’t hold the necessary clout for a major drive and there are no periphery threats to point too. That being said, the benchmark US equity indexes (key measures of risk appetite and drivers of sentiment in their own right) have slipped to new lows for the year and taken out significant support levels along the way. Should this feed momentum and encourage the EURUSD to return to its expected track, we may see another swell for the kiwi to ride.
As for the local fare, the NZIER Business Opinion Survey for the second quarter and card spending for June hold enough weight to alter expectations for the health of the economy. Business confidence is not far from a 10-year high; but concerns over China’s health, a slowing in global growth and a return to rate hikes for the RBNZ could curb plans for production and hiring. The card spending indicator is a good proxy for consumer spending. A broader reading than retail sales, this figure will also have a credit conditions component implied with it. - JK
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