AU Jobs Firm, RBNZ Dovish
AUDNZD was jolted over two big figures higher overnight after the RBNZ took a step towards the dovish end of the spectrum. More significantly though, there was a pronounced rhetorical escalation against currency strength. Governor Wheeler noted rates would likely hold current levels until year end, but warned that the kiwi is over 10-15% overvalued and he said that scope for an interest rate cut would increase if the currency strengthens further. He went on to say that the kiwi is likely to fall at some point, and when the declines come, it could be quite abrupt. Australia’s employment report then registered a 71k gain in the numbers employed – the greatest monthly increase in 13 years. Nonetheless, our economists maintain their non-consensus views for unchanged RBA ahead, while RBNZ tightening may yet commence in September. Ahead today, the SNB and Norges Bank decisions are due. Overnight EURUSD traded 1.2944-1.2981 and USDJPY 95.69-96.14.
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UBS Investment Bank