Kiwi Dollar Slides again, with Geo-politics in Focus Ahead of a Busy Week

Bob Mason
The Dollar’s on the move early, with weekend updates on trade talks with China supporting risk appetite through the early part of the morning. A lack of stats through the day will keep focus on the FED and the Oval Office.

Earlier in the Day:

It’s a relatively quiet start to the week, with Asian stats in focus today, economic data released through the Asian session including 1st quarter retail sales figures out of New Zealand and Japan’s all important April trade figures.

For the Kiwi Dollar, it was yet another disappointment, with quarterly sales rising at a much slower pace than in the 4th quarter.

According to NZ States, quarter-on-quarter, retail sales rose by just 0.1% in the 1st quarter, compared with 1.7% in the 4th quarter, while core retail sales rose by 0.6%, following the 4th quarter’s 1.8% rise.

  • Sales were mixed across the respective segments, with 7 reporting higher sales volumes than in the 4th quarter, while 8 saw lower volumes.
  • Electrical and electronic goods saw the largest quarterly rise, up 5.4%, while clothing footwear and accessories recorded the largest fall, down 5%.
  • On a volume basis, removing price impact, fuel sales also fell, down 2.1% for the quarter.

The Kiwi Dollar moved from $0.69210 to $0.69098 upon release of the figures before easing further to $0.6897, at the time of writing, down 0.14% for the morning.

For the Japanese Yen, April trade figures this morning will have provided some relief, though both imports and exports fell short of forecasts going into the 2nd quarter.

  • Imports rose by 5.9% in April, year-on-year, falling short of a forecasted 9.6% rise, whilst more than reversing March’s 0.6% decline.
  • Exports rose by 7.8%, falling short of a forecasted 8.1% increase, whilst coming in well ahead of March’s 2.1% rise.
  • Exports to China rose by 10.9%, with exports to the U.S rising by 4.3%, the world’s two largest economies being Japan’s largest export markets by some distance.
  • Japan’s trade surplus with the U.S widened by 4.7%, which will likely keep Japan in Trump’s line of sight as the U.S administration addresses perceived trade imbalances.
  • Japan’s trade surplus narrowed from ¥797bn to ¥626bn, which was better than a forecasted narrowing to a ¥406bn surplus.

The Japanese Yen moved from ¥110.873 to ¥110.916 against the Dollar, upon release of the figures, before falling further to ¥111.12 at the time of writing, down 0.31% for the session.

Elsewhere, the Aussie Dollar was up 0.20% to $0.7526 supported by the risk on sentiment across the market, though conflicting messages from the U.S administration on trade talks with China will need to be addressed.

In the equity markets, it was risk on as the markets responded to U.S administration speeches over the weekend on trade talks with China. A rebound in Japanese exports and a softer Yen supported the Nikkei, which was up 0.49% early on, with the Hang Seng and CSI300 up 1.23% and 0.71%, while the ASX200 bucked the trend, down 0.08% in what’s been a choppy morning, .

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the European session, with both French and German markets closed for the day, leaving the markets to consider the week ahead, which not only includes a heavy data schedule and the release of the ECB’s policy meeting minutes, but also possible noise from the Oval Office as the EU looks for exemptions to do business with Iran.

Geo-politics is certainly front and centre for yet another week, with coalition talk from Italy also likely to be a burden for the EUR in the early part of the week.

At the time of writing, the EUR down 0.15% to $1.1754, with policy divergence and Italian politics going against the EUR at the start of the week.

For the Pound, there are no material stats scheduled for release today ahead of a critical week for the Pound, with April inflation and retail sales figures scheduled for release on Wednesday and Thursday, with 2nd estimate GDP numbers due out on Friday.

A bounce back in retail sales could revive talk of a move by the BoE in the months ahead, while progress on Brexit will continue to be a factor for the markets to have to consider.

At the time of writing, the Pound was down 0.23% to $1.3438, with Brexit chatter and expectations towards the week’s stats the key drivers through the day.

Across the Pond, with no material stats scheduled for release, FOMC members Bostic and Harker will provide direction through the U.S session, with noise from the Oval Office also there to consider as the U.S administration goes about its global relationship overhaul.

At the time of writing, the Dollar Spot Index was up 0.19% to 93.815, with Italy and Brexit weighing on the EUR and the GBP to provide support for the Dollar that has benefited from a pickup in momentum in the U.S economy, with inflationary pressures also building.

Across the border, Canadian markets are closed for the day, which will likely leave the Loonie thinly traded, with NAFTA talks now expected to continue through the year that should ease some of the near-term pressure on the Loonie.

At the time of writing, the Loonie was up 0.14% to C$1.2867 against the U.S Dollar, with support coming from a jump in crude oil prices at the start of the week.

This article was originally posted on FX Empire