By Kymberly Martin
It was a relatively quiet night in currency markets with little major news-flow. However the JPY has underperformed and the GBP has enjoyed a boost.
The overall mood in markets remained relatively upbeat overnight. Our global risk appetite index remains at a fairly healthy 62%.
Equity markets were led higher by cyclical sectors as Q2 earnings delivery is beating subdued analyst expectations. However, you could draw a horizontal line through trading in the USD for much of the past 24-hours.
However, there were some notable moves elsewhere. The GBP gained an evening boost after the release of UK labour market data. Although these were historic (May), they showed a tick-up in weekly earnings growth and a decline in the ILO unemployment rate. At 4.9%, this measure is now at its lowest level since late-2005; a healthy starting point ahead of the ‘Brexit’ fallout.
From 1.3080 the GBP/USD headed toward 1.3200. This morning it was boosted further as BoE MPC member, Forbes, said the Bank of England would need more evidence of ‘Brexit’ impacts before cutting rates. The GBP/USD now trades around 1.3220.
The reasonably buoyant mood in risk sensitive markets dampened ‘safe haven’ demand for the JPY. From below 106.00 last evening the USD/JPY now trades near 107.00. This is its highest level since mid-June, prior to the UK ‘Brexit’ result.
The AUD/USD and NZD/USD were on a modest downward path from last evening. Heading into this morning’s RBNZ economic update announcement the NZD/USD sits at 0.7020. This is towards the lower-end of its trading range of the past six weeks.
The NZ TWI sits at 75.50. Although it has fallen around 3.5% from its early-July highs it remains well above the 71.60 level the RBNZ had projected for the current quarter in its last MPS. However, while NZ economic fundamentals remain relatively attractive on a global basis and global risk appetite is solid it is difficult to undermine the NZD.
The market also already prices 50bps of RBNZ rate cuts within the year ahead. It is therefore no easy task, if the Bank is to achieve a much-desired lower NZ TWI via today’s economic update or next month’s MPS.
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1 Comments
From 1.3080 the GBP/USD headed toward 1.3200. This morning it was boosted further as BoE MPC member, Forbes, said the Bank of England would need more evidence of ‘Brexit’ impacts before cutting rates.
What evidence does the 0.829% 10 year Gilt yield present?
Debt is future consumption brought forward. Once debt is incurred, consumption that might have happened in the future won’t happen. And it should come as no surprise that at a certain debt level, growth and income begin to diminish. That is exactly what we are seeing in the real world.
There are basically two categories of debt: debt used to purchase or create productive activities (like tools for a carpenter or a new factory for a business) and debt used to consume.
We forget that debt used for consumption doesn’t create new supply. It simply pulls supply forward in time. The problem is that debt can’t do this forever. Pulling your consumption forward to the present means you will consume less later. Read more
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