Will the RBNZ (Reserve Bank of New Zealand) also adopt a dovish stance following the RBA (Reserve Bank of Australia)? ~ Focus points and schedule for February 13 ~

Yesterday, as tensions in U.S.-China trade talks eased, stock prices rose on a risk-off unwinding. The yen and the franc were sold, and commodity currencies rebounded. However, they did not reach an agreement, and the risk-off possibility remains.

◎ Today’s Highlights

1) New Zealand policy rate announcement

Today, the RBNZ (Reserve Bank of New Zealand) will announce the policy rate and statement. A press conference is scheduled one hour later.

In Australia, the policy rate, statement, and Governor Lowe’s comments caused the Australian dollar to swing significantly. With concerns about economic slowdowns and rate cuts, the AUD was heavily sold. New Zealand will also be affected by the Australian economy. It wouldn’t be surprising if the RBNZ also takes a dovish stance. If so, that would be a factor behind selling the New Zealand dollar. Pay attention to the statement and the press conference.

2) UK Brexit negotiations

Prime Minister May announced yesterday that this week’s UK parliamentary vote will be postponed (called off). Since there has been no progress since the previous vote, it seems she prioritized negotiating with the EU over holding the vote. She stated, “We will talk with the EU today and again this week,” and “We expect to discuss with Labour Leader Corbyn tomorrow,” among other remarks.

If talks progress and headlines emerge, the pound is likely to move. Fundamentally, if the risk of a no-deal Brexit declines, I would like to buy the pound on pullbacks.

3) European economic and political concerns

In Europe, Italy-France tensions, domestic protests in France, problems at Deutsche Bank, issues at Italian banks, etc., are all mounting. Additionally, recession risks loom. Today, many central bank chiefs in Europe are scheduled to speak. In particular, the Italian central bank governor, who is often at the heart of European tensions, is of particular interest.

4) U.S. budget and U.S.-China relations

U.S. issues are reaching a climax. If a resolution with China on trade is not reached by March 1, new tariffs will be imposed. Yesterday’s remarks suggested an extension of the March 1 deadline, but it is not certain. Therefore, an early agreement is hoped for. Conversely, if the U.S.-China agreement is delayed, risk-off sentiment could return, especially affecting Oceania.

Beyond U.S.-China relations, domestic issues remain. A pressing task is the budget. If a budget agreement is not reached by February 15, some government agencies will shut down again. While there is broad agreement that a partial government shutdown must be avoided, it appears no agreement has been reached on the Mexico border wall funding. Also, February 15 is the same day as US Treasuries maturities and interest payments. Missing those payments would be a major problem and could lead to a downgrade. I will watch budget-related headlines closely.

◎ Today’s Economic Event Schedule

February 13 (Wednesday)

U.S.-China trade talks

08:30 AUD Westpac Consumer Confidence

08:30 EUR Lautenschlager, ECB Executive Board member, speech

08:30 USD Mester, Cleveland Fed President, speech

09:30 USD George, Federal Reserve Bank of Kansas City President, speech

10:00 NZDRBNZ Policy Rate Announcement

11:00 NZDRBNZ Governor press conference

17:30 SEK Sweden Policy Rate Announcement

17:55 EUR Lane, Finland Central Bank Governor, speech

18:30 GBPCPI (Consumer Price Index)

19:00 EUR Eurozone Manufacturing/Industrial Production

22:30 USDCPI (Consumer Price Index)

22:50 USD Barkin, Richmond Fed President, speech

22:50 USD Mester, Cleveland Fed President, speech

23:00 EURVisco, Italy Central Bank Governor, speech

February 14 (Thursday)

U.S.-China senior officials trade talks

00:30 USD Crude oil inventory

02:00 USD Harker, Philadelphia Fed President, speech

04:00 USD Monthly budget statement