Kuroda delivers knockout blow to the Greenback

Yesterday’s markets

11th June 2015

  • UK Manufacturing Production m/m: -0.4%
  • UK NIESR GDP Estimate: 0.6%
  • BoE Gov Carney Spoke
  • NZD Official Cash Rate: 3.25%
  • AUD Employment Change: 42.0k
  • AUD Unemployment Rate: 6.0%

The Dollar continued to weaken across the board yesterday after Bank of Japan’s Governor Kuroda sparked a selloff in the Greenback against the Japanese Yen. Kuroda may have put a short term cap on USDJPY appreciation as he stated its “hard to see Yen real effective rate falling further”, whilst signalling that the Yen’s rate is “very weak”. Substantial strength was seen in the Yen, dragging the depreciating Dollar across the board as market participants unwound long Dollar positions. This USDJPY trend remained throughout the day and the Greenback continued to decline.

Data wise, the UK released both manufacturing and industrial production numbers yesterday morning. The results were mixed with manufacturing missing economists’ consensus of 0.1% and posting a bearish -0.4%. Industrial production however exceeded forecasts, posting a better than expected 0.4% as gas and oil output surged. The manufacturing decline was predominantly driven by a decline in pharmaceuticals. A sharp but short Sterling decline followed after this release against the Dollar before returning to the pre data rate.

Last night, the annual Mansion House Meeting had Chancellor George Osborne announcing the government’s plans to sell its stake in the Royal Bank of Scotland.  With advice from Mark Carney, the head of the BOE also stating that the phased sell off would promote financial stability and benefit the economy.  RBS was bailed out back in 2008 with taxpayers money for around £45.8bn and with this proposed sell off from the Chancellor last night has already drawn some criticism, as the shares sold now would be at a considerable loss which ultimately weighs on the taxpayer.

The Reserve Bank of New Zealand unexpectedly cut their interest rate last night from 3.50% down to 3.25%.  RBNZ governor Graeme Wheeler cut the rate by 25 basis points as declining business and consumer confidence is being felt, plus low inflation prompted the cut.  This action caused the New Zealand Dollar to fall against all major currencies, as Graeme Wheeler left the door open for possible stimulus in the near future if needed.

Today’s markets

10th June 2015

  • CNY Industrial Production y/y: 6.1%
  • US Core Retail Sales m/m
  • US Retail Sales m/m
  • US Unemployment Claims
  • BOC Gov Poloz Speaks

Today’s docket the focus will remain on the US as the Market continues to decipher data ahead of next week’s FOMC meeting. US retail sales will give the market a handle on the confidence of the consumer whilst the weekly jobless claims will be monitored.