News

RBNZ Aggressive Easing Sinks NZD

NZD

The Reserve Bank of New Zealand surprised the markets and lowered interest rates by 50 basis points, driving the Kiwi to its lowest levels since January 2016. Market participants were expecting a 25 basis point rate cut only. The Governor declared that such today's decision doesn't rule out further action for the future, which added to the New Zealand Dollar losses. The NZDUSD tumbled to $0.6377, and the EURNZD soared to a ten-month low of 1.75738. Also, the Australian dollar incurred losses amid growing chances that the Reserve Bank of Australia will cut interest rates further in the coming meetings. The AUDUSD dived to $0.6677, the lowest since March 2009, and the EURAUD rallied to a fresh ten-year high of 1.6798.

USD

The dollar index which measures the greenback against a basket of major currencies held steady near 97.60 awaiting fresh drivers. The renewed trade tensions between China and the United States weighed on investors' risk sentiment. Moreover, the recent developments increased the chances of interest rate cuts by the Federal Reserve in the coming meetings to offset the downside risks arising from the trade disputes. As per the CME Fed watch tool, the probability of a 25 basis point rate cut in September sits at 81.2%. The US 10-year yields dropped to 1.671%, the lowest since October 2016, the USDJPY declined to 105.93, and the EURUSD rose to $1.1219.

Metals

Gold prices extended gains to more than 16% this year as Central Banks implement aggressive monetary policy easing measures to support their slowing economies. The price of a gold ounce soared to a fresh six-year high of $1491 as the RBNZ lowered interest rates by 50 basis points. The price of a silver ounce rose to a fourteen-month high of $16.79, and palladium held steady above $1440.

Oil

Oil prices drifted lower as the US-China trade spats continued to weigh on the global economic outlook. A full-blown trade war between the world's largest economies could force the global economy into a recession, and hurt oil demand. The West Texas Intermediate crude futures dropped to a six-week low of $53.14, and Brent futures tumbled to a seven-month low of $58.69. The spread between the WTI and Brent dropped to $5.05, the lowest in a year.

Major Economic Events

GMT Country Event Expectation Previous

14:00

CA

Ivey PMI (Jul)

53

52.4

14:30

US

Crude Oil Inventories

-2.845

-8.496


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