Aussie and NZ Dollars Drop on Hong Kong Turmoil, RBNZ Intervention

2014-09-29 03:13:00 Ilya Spivak, Head Strategist, APAC

Talking Points:

Aussie and NZ Dollars Drop on Hong Kong Turmoil, RBNZ FX Intervention
Euro May Be Asymmetrically Sensitive to Upbeat German Inflation Figures
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The Australian and New Zealand Dollars underperformed in overnight trade. Turmoil in Hong Kong offered the backdrop for risk aversion that weighed on the sentiment-linked currencies as protesters faced off in violent clashes with police. Instability in China that may compound already mounting headwinds facing economic growth there bode ill for Australia and New Zealand’s economic prospects considering both countries count on the East Asian giant as a vital export market. This in turn reflects negatively on interest rate hike prospects.

The Kiwi suffered outsized losses, falling as much as 1.6 percent on average, after the RBNZ revealed that it sold a net NZ$521 million in August, the most since July 2007. Separately, Interest.co reported a comment from newly re-elected New Zealand Prime Minister John Key saying the “goldilocks” level for NZDUSD is 0.65. A move to this threshold from current levels would imply a depreciation of over 15 percent.

Looking ahead, the preliminary set of September’s German CPI figures headlines the economic calendar in European hours. The benchmark year-on-year inflation rate is expected to remain unchanged at 0.8 percent. On balance, the Euro may be most reactive to a better-than-expected outcome that bolsters expectations of a move into wait-and-see territory at the ECB after the central bank unveiled a range of easing efforts over recent months. That could trigger liquidation on stretched speculative net-short positioning, which now stands near the highest level in 26 months. Otherwise, traders may not find enough novelty in the data to drive a meaningful response.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
		None

European Session

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
8:30	GBP	Mortgage Approvals (AUG)	65.0K	66.6K	Medium
8:30	GBP	Net Consumer Credit (AUG)	0.8B	1.1B	Low
8:30	GBP	Net Lending Sec. on Dwellings (AUG)	2.1B	2.3B	Low
8:30	GBP	M4 Money Supply (MoM) (AUG)	-	0.3%	Low
8:30	GBP	M4 Money Supply (YoY) (AUG)	-	-1.0%	Low
8:30	GBP	M4 Ex IOFCs 3M Annualized (AUG)	-	3.8%	Low
9:00	EUR	Eurozone Industrial Confidence (SEP)	-5.8	-5.3	Low
9:00	EUR	Eurozone Business Climate Indicator (SEP)	0.10	0.16	Low
9:00	EUR	Eurozone Economic Confidence (SEP)	99.9	100.6	Medium
9:00	EUR	Eurozone Consumer Confidence (SEP F)	-11.4	-11.4	Medium
9:00	EUR	Eurozone Services Confidence (SEP)	2.5	3.1	Low
12:00	EUR	German CPI (MoM) (SEP P)	-0.1%	0.0%	High
12:00	EUR	German CPI (YoY) (SEP P)	0.8%	0.8%	High
12:00	EUR	German CPI - EU Harmonized (MoM) (SEP P)	-0.1%	0.0%	High
12:00	EUR	German CPI - EU Harmonized (YoY) (SEP P)	0.7%	0.8%	High