"Dad, why is the New Zealand dollar considered a major currency?"
"I don't know son, I just don't know."
From Marc to Market:
RBNZ Moves Ahead of the Queue, Will the Bank of Canada Maintain its Place?
Overview: The Reserve Bank of New Zealand jumped to the front of the queue of central banks adjusting monetary policy by announcing the end of its long-term asset purchases. New Zealand's s 10-year benchmark yield jumped seven basis points, and the Kiwi is up almost 1%, to lead the move against the greenback today. Sterling is up around a quarter of a percentage point after it reported a larger than expected rise in CPI. Most of the other major currencies, but the Swiss franc and Swedish krona are posting small gains. Emerging market currencies are also narrowly mixed, leaving the JP Morgan EM index virtually flat on the session. Of note, ahead of Turkey's central bank decision, the lira has stabilized after rising for the past four sessions. Equity markets are struggling today. The MSCI Asia Pacific Index fell for the first time this week. Of the large markets, only Australia and India indices gained. Europe's Dow Jones Stoxx 600 is also threatening to post its first loss of the week. US futures are little changed. The US 10-year yield slipped lower after yesterday's unexpectedly strong CPI print but reversed with the help of a poor 30-year auction that generated a four basis point tail, the biggest this year. The benchmark yield is off a couple basis points today and is back below 1.40%. European bond yields are little changed, though, on the back of a strong CPI report, the 10-year Gilt yield is up four basis points. Gold is firm, within yesterday's range, around $1815. Oil prices have come back softer after yesterday's 1.5%-1.7% gain. Industrial metals are mixed. Iron ore prices rose for the third consecutive session, while copper prices are heavy and have not risen this week. The CRB Index rose yesterday for the fourth consecutive session.
Asia Pacific
The Reserve Bank of New Zealand met and surpassed the more hawkish shift in market expectations. It announced that its long-term asset purchases were no longer necessary and will stop these operations by the end of next week. Its statement dropped the reference to the need for patience to achieve its dual mandate. The market had been leaning toward a rate hike in November and solidified those expectations today. Some aggressive participants may see a hike at the August 18 RBNZ meeting. Note that at the end of this week, New Zealand reports Q2 CPI. The year-over-year rate is expected to rise to 2.7% from 1.5% in Q1.
Australia reports June employment data tomorrow. The tight border restrictions have helped the labor market recover. It filled 97.5k full-time positions in May but cannot maintain that pace. Sydney's lockdown has been extended another couple of weeks, but Westpac's measure of consumer confidence improved from June (1.5% vs. -5.2%). Separately, South Korea, Indonesia, and Malaysia are reporting a record number of covid cases. Meanwhile, Japan's May industrial output was revised lower. Rather than contract by 5.9% on the month, as initially reported, it fell 6.5%. The BOJ's two-day meeting starts tomorrow and today's data reinforces ideas that it will revise down its growth forecast from its previous projection of 4% growth. Elsewhere in the region, South Korea reported its fourth consecutive month of jobs gains, while Singapore's economy contracted by 2% in Q2, a little more than expected, after a 3.1% quarter-over-quarter expansion in Q1...
....MUCH MORE
