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US Dollar Under Fire, NZ Dollar Extends Gains into RBNZ Meeting

US Dollar Under Fire, NZ Dollar Extends Gains into RBNZ Meeting

Talking Points:

The US Dollar faced selling pressure in overnight trade as US bonds advanced, pushing rates lower and undermining yield support for the benchmark currency. Fixed income demand appeared to stem from haven demand, with rising bond prices mirroring a drop in S&P 500 futures. Tellingly, the anti-risk Japanese Yen outperformed among the G10 FX majors.

The British Pound corrected higher having slumped following dovish comments from the BOE’s Ian McCafferty yesterday. The New Zealand Dollar continued to rise in what looks to be an extended pre-positioning for the upcoming RBNZ monetary policy announcement. A 25bps rate cut is broadly expected, meaning surprise risk is skewed to the upside for the currency if forward guidance is less dovish than what is already priced in. With that in mind, gains may reflect protective short-covering.

A scheduled speech from RBA Governor Glenn Stevens – his final outing at the helm of the central bank before stepping down next month – did not generate a dramatic response from the Australian Dollar. Stevens reiterated familiar sentiments, cautioning about over-reliance on monetary policy to deliver growth and urging fiscal authorities to do their part. He also voiced support for inflation-targeting as a policy regime versus more rigid alternatives like that gold standard or an exchange-rate peg.

Looking ahead, another quiet day on the European and US economic data fronts is likely offers few stumbling blocks for established momentum. As noted yesterday however, the lull in high-profile news flow may make markets more sensitive than usual to unexpected headline risk. Otherwise, the aforementioned RBNZ rate decision marks the next key inflection point.

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Asia Session

22:00NZDREINZ House Sales (YoY) (JUL)-10.1%-6.0%
23:50JPYHousing Loans (YoY) (2Q)2.4%-1.9%
23:50JPYMachine Orders (MoM) (JUN)8.3%3.2%-1.4%
23:50JPYMachine Orders (YoY) (JUN)-0.9%-4.5%-11.7%
23:50JPYPPI (MoM) (JUL)0.0%-0.1%-0.1%
23:50JPYPPI (YoY) (JUL)-3.9%-4.0%-4.2%
00:30AUDWestpac Consumer Conf Index (AUG)--99.1
00:30AUDWestpac Consumer Conf SA (MoM) (AUG)2.0%--3.0%
01:30AUDHome Loans (MoM) (JUN)1.2%2.3%-0.8%
01:30AUDInvestment Lending (JUN)3.2%-5.3%
01:30AUDOwner-Occupier Loan Value (MoM) (JUN)1.8%--0.1%
02:00JPYTokyo Avg Office Vacancies (JUL)3.94-4.07
03:05AUDRBA Governor Stevens Speech in Sydney---
04:30JPYTertiary Industry Index (MoM) (JUN)0.3%0.8%-1.2%

European Session

06:00CHFUBS Real Estate Bubble Index (2Q)1.32 (A)1.381.35

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.