Orr's Hawkish Hold, FOMC's Hawkish Minutes?
As the dust settles on the RBNZ, we will be watching to see if the kiwi can hold above nine month lows. If so, it will be impressive resilience after one of the worst 24 hour periods of news a currency has faced this year. In that span, the country was hit by a covid case, a lockdown, six more covid cases and a surprise central bank move. Yet NZD is only down about 80 pips and it came in a tough moment for broader risk appetite. If that kind of brutal news flow can't decisively send a currency to 9 month lows, then what can? We should also ask whether NZD will become beholden to each new daily Covid case.
Meanwhile, the US is facing its own trial after the retail sales control group fell 1.0% compared to a 0.3% decline expected. Notably, US cases hadn't risen significantly in July so worse news is likely to come in August and special unemployment benefits for 8 million Americans will be cut off in early September.
That hardly sounds like a case for a rushing into a taper and there's a growing case that will be the message from Powell at Jackson Hole.The FOMC minutes on Wednesday risk sending mixed messages as usual. For sure there was some talk of tapering and that will come through in the minutes but headlines from the minutes often trip up the market. Will the minutes be considered too hawkish and outdated after those disastrous Umich Confidence numbers?
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