· The beaten-up New Zealand dollar soared 1% on Wednesday after the central bank unexpectedly left interest rates on hold, while most other major currencies were little changed.
The kiwi NZD=D3 zoomed almost a cent higher after the decision, before settling a percentage point stronger for the day at $0.6303. Yields on two-year New Zealand bonds NZ2YT=RR jumped by their most in more than two years.
Elsewhere, the U.S. dollar was mixed and moves slight as investors looked for news on U.S.-China trade negotiations and awaited testimony from Federal Reserve Chairman Jerome Powell before a congressional committee at 1600 GMT.
The first public hearings in Trump’s impeachment inquiry also begin an hour earlier at 1500 GMT.
The dollar scaled a month-high against the euro EUR= overnight and traded marginally below that level at $1.013 on Wednesday.
· RBNZ Governor Adrian Orr: Low currency has supported New Zealand's earnings, we will add further monetary stimulus if needed. Inflation expectations very important to us, long-term inflation expectations are well anchored.
ANZ Bank sees #RBNZ cutting rates in May and August 2020 –BBG
· USD/JPY supported at 10-DMA amid risk-off, eyes US CPI, Powell
USD/JPY bounced-off the10-DMA support near 108.85 and regained the 109 handle, despite the risk-off action in the Asian equities and US equity futures amid trade deal uncertainty. The bulls seem to have found some support from higher US Treasury yields.
The USD/JPY is trading lower in range, with the risk skewed to the downside according to the 4-hour chart, as the price remains below a flat 20 SMA while technical indicators head south within negative levels. Nevertheless, the downside potential seems limited, with an immediate support at 108.90, and the next one at 108.65. It will be below this last that the pair would have chances of declining further.
Support levels: 108.90 108.65 108.40
Resistance levels: 109.30 109.60 110.00
· Following today's unexpected #RBNZ rate hold, overnight index swaps are now pricing in a 27.8% chance of a 25bp reduction from the central bank at the February 2020 meeting with odds hovering at 53.3% for a September delivery instead –BBG
· Major automakers think U.S. President Donald Trump will again this week push back a self-imposed deadline on whether to put up to 25% tariffs on national security grounds on imported cars and parts from the European Union and Japan amid an ongoing trade war with China, five auto officials told Reuters.
The anticipated delay — expected to be announced later this week — comes as foreign automakers are eager to highlight U.S. investments to try to dissuade Trump from using tariffs that they argue could cost U.S. jobs.
U.S. Commerce Secretary Wilbur Ross said earlier this month tariffs may not be necessary. EU officials expect Trump to announce a six-month delay when he faces a self-imposed deadline this week. Trump in May delayed a decision on tariffs by up to 180 days as he ordered U.S. Trade Representative Robert Lighthizer to pursue negotiations.
· The ongoing protests in Hong Kong are likely to spur China to meddle in the city’s affairs more, according to one strategist that spoke to CNBC on Wednesday.
The comments follow a recent escalation in violence in the embattled city, which has been plagued by civil unrest that has now stretched on for more than five months.
“I think what the protests in recent months made, the biggest change, is I think Beijing ... will intervene in Hong Kong’s affair(s) a lot more,” David Cui, head of China equity strategy at Bank of America Merrill Lynch, told CNBC’s “Street Signs.”
Hong Kong prepared for more clashes on Wednesday as anti-government protesters paralysed parts of the Asian financial hub for a third day, with some transport links, schools and many businesses closing after an escalation of violence.
· After a speech from President Donald Trump on Tuesday, eyes are shifting to Federal Reserve Chairman Jerome Powell, who will speak to the Congressional Joint Economic Committee on Wednesday about the current economic outlook.
Following the Fed’s third interest rate cut of the year on Oct. 30, Powell signaled that the Fed’s moves to ease policy could be nearing a pause. Powell said central bank officials “see the current stance of monetary policy as likely to remain appropriate.” Investors will be looking for additive details on the central bank’s current impression of the health of the economy.
· A key indicator of inflation trends, the Consumer Price Index (CPI) will be released by the Labor Department on Wednesday. Economist polled by Dow Jones are estimating U.S. consumer prices rose 0.3% in October, and at 1.7% annual rate. This reading is still below the Fed’s 2% inflation target. If inflation comes in any hotter than the estimates it could raise concerns about whether the Fed’s current monetary policy is too easy.
· Federal Reserve Chairman Jerome Powell is likely to signal again this week that monetary policy is on hold, buttressing the belief that he may steer clear of action through 2020.
Surprisingly, that would be an historic anomaly for a U.S. presidential election year. Rather than keeping its head down, the Fed has changed policy in one direction or another in each of the last 10 presidential polling years -- though in 2016 it didn’t act to raise interest rates until after the November election.
· Oil prices dipped on Wednesday as prospects for a trade deal between the United States and China dimmed, weighing on the outlook for the global economy and energy demand.
U.S. President Donald Trump said on Wednesday that the two countries were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony, disappointing investors.
Brent crude futures LCOc1 edged down 18 cents, or 0.3%, to $61.88 a barrel by 0411 GMT, while U.S. West Texas Intermediate crude CLc1 was at $56.67, down 13 cents or 0.2%.
A forecast by the International Energy Agency for slower global oil demand growth post-2025 also weighed on the market
Reference: Reuters, CNBC, DailyFX,Bloomberg
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