The Reserve Bank of New Zealand has decided on Thursday to raise its Official Cash Rate by 25 percentage points to 3.50 percent to contain inflation which currently remains moderate. Reserve Bank Governor Graeme Wheeler stated that amidst the backdrop of weak commodity prices, the New Zealand Dollar’s current level is “unjustified and unsustainable and there is potential for a significant fall”. He said the OCR’s future hiking path is dependent on “the assessment of the impact of the tightening in monetary policy to date, and the implications of future economic and financial data for inflationary pressures.” Meanwhile, the June Trade Balance has beaten expectations, posting NZ$247 million, its second straight monthly surplus.
In the United States, another mixed bag of data was published this week. June Existing Home Sales came in slightly better than forecast at 5.04 million, but New Home Sales registered a much weaker reading (406k vs 485k expected). June Durable Goods Orders and its core reading were both up (0.7 percent and 0.8 percent, respectively). Finally, Jobless Claims trumped expectations for a third straight week (284k vs 310k forecast).
In other news, UK Public Sector Net Borrowing and CBI Realized Sales posted better readings. However, CBI Industrial Order Expectations registered a reading of 2, the third weakest reading in the last 6 months.
Gold sat nearly unchanged this week, with just a slight bearish bias although price closed above the $1,300 level. Gold have been pounded by sellers all week, but bulls managed to eke out a substantial gain on Friday after price declined to as low as $1,287 on Thursday. They need to exert more next week to prevent a repeat of this week’s price action. Target remains a break of $1,250.
Oil posted an inside bar this week, as buyers and sellers attempted to gain control. Price ended pretty much unchanged and closed the week just below the $102 area. This puts oil at risk of another round of selling toward $100 in the coming week, unless buyers will act early and push price toward $104 in the first few trading sessions.
A EURUSD weekly close above 1.3550-1.3600 never happened, and the pair progressed to clinch what looks like a 9-consecutive daily decline amid the significant bearish tone in this pair. This pair is on track to visit 1.3300-50 in the coming week or so unless bulls will do something to thwart it.
GBPUSD followed EURUSD down for a second consecutive week as the former’s 1.7000 level failed to hold the selling attacks. If bearish momentum intensifies, this pair could easily reach 1.6600-1.6700 in the coming week. On the bright side, there is an opportunity to reclaim the 1.7000 level on that same week.
USDJPY averted another selldown this week thanks to five straight bullish daily closes. Bulls will have to complete the control of 102 next week so they can tackle 103 and 104 and get out of the current consolidation. On the downside, they must keep a strong support at 101.
The Week Ahead
Monday’s news activity will be very brief with only US Flash Services PMI and Pending Home Sales on the cards.
Tuesday will have much more activity with Japan’s Household Spending, Jobless Rate, and Retail Sales; Australia’s HIA New Home Sales; UK’s Net Lending to Individuals, Mortgage Approvals, and M4 Money Supply; US S&P/CS Composite-20 HPI and CB Consumer Confidence.
Wednesday will be very busy starting with New Zealand’s Building Consents; Japan’s Preliminary Industrial Production; Germany’s Prelim CPI; Switzerland’s KOF Economic Barometer; Spain’s Flash CPI and Flash GDP; Canada’s RMPI; US ADP Non-Farm Employment Change, Advance GDP, FOMC Statement and Federal Funds Rate.
Thursday will offer Australia’s Building Approvals and Import Prices; Japan’s Average Cash Earnings; Germany’s Retail Sales and Unemployment Change; UK Nationwide HPI; France’s Consumer Spending; Eurozone CPI Flash Estimate and Jobless Rate; Canada’s GDP; US Unemployment Claims Employment Cost Index, and Chicago PMI.
Friday will end the week with considerable activity, particularly China’s Manufacturing PMI and HSBC Final Manufacturing PMI; Australia’s PPI; BOJ Kuroda’s speech; Spain, UK, and Italy Manufacturing PMI; Eurozone Final Manufacturing PMI; US Unemployment Rate, Non-Farm Employment Change, Core PCE Price Index, Personal Spending, ISM Manufacturing PMI, and Revised UoM Consumer Sentiment.