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NZ Dollar Falls on CPI Miss, Aussie Dollar Down After China GDP Data

NZ Dollar Falls on CPI Miss, Aussie Dollar Down After China GDP Data

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • NZ Dollar Falls on CPI Miss, Aussie Dollar Down After Chinese GDP
  • British Pound May Not Find Direction in June’s Jobless Claims Data
  • US Dollar Eyes Yellen Testimony for Direction Guidance Once Again

The New Zealand Dollar underperformed in overnight trade, sliding as much as 0.7 percent on average against its leading counterparts. The move followed softer-than-expected CPI figures for the second quarter. The baseline year-on-year inflation rate registered at 1.6 percent, falling short of consensus forecasts calling for a 1.8 percent result. That seemingly undermined RBNZ rate hike expectations, with the slide in the Kiwi tracking a parallel move lower in the New Zealand’s benchmark 10-year bond yield.

The Australian Dollar likewise traded lower, losing as much as 0.24 percent against the majors. Curiously, the move followed an upbeat set of Chinese GDP figures. Output grew 2.0 percent in the second quarter, topping bets calling for a 1.8 percent increase. Supportive Chinese data might have been expected to boost the Aussie considering the East Asian giant is Australia’s top trading partner, meaning firming performance there bodes for the latter country’s pivotal export sector.

The newswires chalked up this apparent disparity to concerns that the Chinese economy’s recovery was unsustainable, suggesting seemingly sharp credit expansion rather than hard growth is behind the rosy headline GDP reading. Fading stimulus expansion bets were likewise cited, with investors apparently worried that the second-quarter data set will discourage further expansionary policy. Needless to say, it is all but impossible to tell with absolute certainty why the markets were unimpressed and the Aussie fell. In any case, we remain short AUDUSD.

June’s UK Jobless Claims figures headline the economic calendar in European hours. Expectations call for a 27,000 drop in new applications for unemployment benefits, which would mark the smallest drawdown in 13 months. Absent a dramatic deviation from expectations, the outcome may pass with little fanfare considering its relatively limited implications for BOE monetary policy bets and thereby for the British Pound. Meanwhile, technical positioning warns GBPUSD may be carving out a top below the 1.72 figure.

The spotlight then shifts to US policy concerns as Fed Chair Janet Yellen testifies before Congress for a second day, this time appearing before the House of Representatives having talked to the Senate yesterday. The central bank chief’s prepared remarks are likely to sound familiar and offer little impetus for volatility. The Q&A session that follows might produce some fireworks if lawmakers manage to squeeze out anything about the likely timing of interest rate hikes however, prompting a response from the US Dollar.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Consumer Prices Index (YoY) (2Q)

1.6%

1.8%

1.5%

22:45

NZD

Consumer Prices Index (QoQ) (2Q)

0.3%

0.4%

0.3%

0:30

AUD

Westpac Leading Index (MoM) (JUN)

0.1%

-

0.1%

2:00

CNY

GDP (QoQ) (2Q)

2.0%

1.8%

1.5%

2:00

CNY

GDP (YoY) (2Q)

7.5%

7.4%

7.4%

2:00

CNY

GDP YTD (YoY) (2Q)

7.4%

7.4%

7.4%

2:00

CNY

Retail Sales (YoY) (JUN)

12.4%

12.5%

12.5%

2:00

CNY

Retail Sales YTD (YoY) (JUN)

12.1%

12.2%

12.1%

2:00

CNY

Industrial Production (YoY) (JUN)

9.2%

9.0%

8.8%

2:00

CNY

Industrial Production YTD (YoY) (JUN)

8.8%

8.8%

8.7%

2:00

CNY

Fixed Assets Ex Rural YTD (YoY) (JUN)

17.3%

17.2%

17.2%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:30

GBP

Jobless Claims Change (JUN)

-27.0K

-27.4K

High

8:30

GBP

Claimant Count Rate (JUN)

3.1%

3.2%

Medium

8:30

GBP

ILO Unemployment Rate (3Mths) (MAY)

6.5%

6.6%

Medium

8:30

GBP

Employment Change (3M/3M) (MAY)

243K

345K

Low

8:30

GBP

Avg Weekly Earnings (3M/(YoY) (MAY)

0.5%

0.7%

Low

8:30

GBP

Weekly Earnings ex Bonus (3M/(YoY) (MAY)

0.8%

0.9%

Low

9:00

EUR

Euro-Zone Trade Balance (€) (MAY)

16.5B

15.7B

Low

9:00

EUR

Euro-Zone Trade Balance s.a. (€) (MAY)

16.0B

15.8B

Low

9:00

CHF

ZEW Survey (Expectations) (JUL)

-

4.8

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.3454

1.3520

1.3544

1.3586

1.3610

1.3652

1.3718

GBPUSD

1.6868

1.7000

1.7072

1.7132

1.7204

1.7264

1.7396

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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