The Euro has been on a tear of late, with gains of nearly 4.5% against the Australian Dollar seen in the last 3 weeks. This was bought to a screeching halt last night as we had weaker than expected inflation data by way of Consumer Price Index numbers .The market was expecting 0.9% which was in line with the previous months reading , instead we had a reading of 0.7% . As long as we continue to see weaker than expected inflation data, common sense tells us that the probabilities of Mario Draghis monetary policies of negative interest rates on cash deposits changing anytime soon remains low.
The German Unemployment Rate remained the same with forecasts of 6.7% being spot on with the actual number released last night. German retails sales also were weaker than expected, signalling a slowdown in the all important consumers’ spending which is the life blood of a healthy economy. The Euro gave up a little over 1% against the Aussie Dollar with potential for a deeper selloff as the week goes on.
Across the Tasman, the RBNZ or Reserve Bank Of New Zealand led by Governor Brian Wheeler started the week off by selling nearly 500 million NZ Dollars in cash reserves on the market, following through with a threat a week or so back that they would intervene if and when necessary on the currency markets to bring down the value of the New Zealand Dollar. Prime Minister John Key on Monday indicated that he thought the ‘’Goldilocks level ‘’ or fair value for the NZD against the USD was around the 0.65 mark and that it would be logical to see the RBNZ intervene to push the Kiwi Dollar lower and that’s exactly what they did .
Within minutes of the release of its currency reserves data showing that they had indeed intervened during the month of August, the Kiwi Dollar lost over 1.5% against the Aussie and about 2% against the U.S Dollar. This also signals to the market of more intervention to come. Canadian GDP came in weaker than expected with forecast of 2.8% wide of the mark with the actual release coming in at 2.5%, the result seeing the loonie selloff 1%+ against most of the majors