Today’s Main event will be comments from Bank of Canada Governor Poloz who is due to hold a press conference following the Bank of Canada’s Financial System Review later in today’s New York session. With no other data releases of note, current sentiment is likely to remain the primary driver in currency pairs.
The main event during the very early Asian session was the interest rate decision from the RBNZ. The Bank kept rates on hold at 2.25% which is something we had forecast ever since the Financial Stability Report which contained no plans for macroprudential controls. Prior to the FSR the market was pricing 85% probability of a cut. However in the days leading up to the decision those probabilities were close to 30%. The accompanying statement retained much of the dovish remarks from prior ones, in that further easing may be required, policy will remain accommodative and inflation remains low. They also jawboned the currency saying the exchange rate was too high. There were some less dovish changes, in that short-term inflation expectations have stabilised and they expect inflation to strengthen alongside the rise in oil. Nevertheless, the mere fact that there was some market expectations for a cut saw NZD rally with the slightly less dovish statement aiding further gains with Kiwi stretching 150 pips to the upside.
Later in the Asian session we saw CPI from China which printed below expectations at 2% y/y below 2.3% expected. PPI declined -2.8% y/y.
Bank of Canada Governor Poloz speech was covered in this week’s weekly risk event video here.