Forex Investment and Currency Trading

Asia: Chinese July data in focus, Q2 GDP from HK and Indonesia
Following the positive performance in Q2, the market will continue to expect improvements from Chinese economic data for July. Although the y/y contraction in exports and imports (Tuesday 11) is likely to persist, industrial production (Wednesday 12) should remain supported by restocking as well as domestic demand, mirroring the consistent improvement in PMI indices. While Beijing seems to be concerned about the threat of inflation, the producer and consumer price indices (Monday 10) are expected to show muted inflationary pressure, at least for now. Elsewhere, Indonesia (Monday 10) and [...]

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RBNZ Rate Decision - July 30
The RBNZ is universally expected to leave rates unchanged at 2.5% at this meeting. The statement, meanwhile, may adopt a modestly more upbeat tone in light of Governor Bollard’s recent speech (July 14) in which he noted “early signs of global recovery have now emerged” and that “New Zealand looks likely to start recovering ahead of the pack”. Further jawboning regarding the strength of the New Zealand dollar is, however, likely given the Bank’s concern that a recovery will only prove sustainable if it is affected through a rebalancing toward external demand. On balance, market [...]

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Fitch affirmed New Zealand’s AA+ rating today (one notch below its top rating), but in a surprise move, revised its outlook to Negative from Stable, highlighting a weak medium-term growth outlook, rising external debt and a large current account deficit. Fitch’s move was a surprise to the market, given the positive reaction to the Budget in late May from Moody’s and S&P. Following the Budget, Moody’s announced that the outlook on New Zealand’s Aaa sovereign credit rating remained Stable, and S&P upgraded its outlook to Stable from Negative. The market will now be watching the reaction of Moody’s and S&P [...]

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The G8 meeting in Italy this week is likely to be watched for any comments on the role of the USD as a reserve currency. There have been more comments from Chinese and Indian officials on this issue over the past few days, and the French Economy Minister has called for better co-ordination on FX. The latter comment does not necessarily have USD-negative connotations - “co-ordination” seems to reflect more a desire for stability rather than an abandonment of the USD as a dominant reserve currency. In addition, euro area officials probably see more downside from reserves diversification, at least [...]

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