New Zealand Hikes Rate as Expected; Australia’s Jobs Data Mixed but Gloomy

The Reserve Bank of New Zealand decided in line with expectations this week, raising the Official Cash Rate by 25 basis points to 3.25 percent. The central bank noted that it will continue reducing the stimulus amid the acceleration seen in the local economy. RBNZ Governor Graeme Wheeler zeroed in on inflation, saying “it is important that inflation expectations remain contained and that interest rates return to a more neutral level.”

In the United States, the Jobless Claims for the prior week grew to 317,000, more than anticipated. This puts the Jobless Claims in an upside path for the second consecutive month.

Meanwhile, data released by the Australian Bureau of Statistics on Thursday showed that 4,800 jobs were removed from the economy in May, while the Unemployment Rate stayed at 5.8 percent for the third month in a row. ANZ Job Advertisements complements the bureau’s data, as the former surprisingly dropped 5.6 percent in May, its first decline since January and the worst since May 2011.

Commodities

Gold made some progress last week after bears struggled to break through the mid-$1,250s during the prior week. Now, it’s the turn of the buyers to show they can muster the strength to break through the $1,300 level again. Potential resistance still up ahead until $1,350, so they should be careful.

After a brief selldown through $102, Oil recovered last week and made a quick dash to break through the multi-month highs. Price closed the week well above the resistance, after reaching as high as the $107s. This week, we’ll wait for a possible retracement back to the $104-$105 area or for a possible continuation of the upmove. As mentioned in the previous weeks, $110-$112 is the key resistance up ahead.

Currency Pairs

EURUSD has moved to the opposite direction of what GBPUSD has taken. This pair is now on the verge of a selldown to multi-month lows if bulls won’t be able to defend the 1.3500 level again in the coming weeks. Resistance remains at 1.3800.

The bullish inside week mentioned previously has snowballed into increased bullish momentum this week. Essentially, bulls successfully defended the mid-1.6700s for several weeks and went on to clinch the 1.7000 level, the highest this pair has reached since August 2009. We expect some major battle around this area before it gets resolved in either direction.

The 102 level in USDJPY continues to attract both buyers and sellers as the pair continues in its merry consolidation path. Bears clearly won last week, but they need to take advantage of the recent bearish tone to attack the 100 level again.

The Week Ahead

On Monday, the news releases will be scattered throughout the day, but activity will be concentrated on the North American session: New Zealand’s Westpac Consumer Sentiment; RBA Assistant Governor Kent’s speech; BOJ Monthly Report; Eurozone CPI; Canada’s Foreign Securities Purchases; US TIC Long-Term Purchases, Empire State Manufacturing Index; Capacity Utilization Rate, Industrial Production and NAHB Housing Market Index.

On Tuesday, news activity will start with RBA’s Monetary Policy Meeting Minutes and New Motor Vehicle Sales; Switzerland’s PPI; UK CPI, RPI, and PPI Input; Germany’s ZEW Economic Sentiment; US Building Permits, CPI, and Housing Starts.

Wednesday will be abbreviated compared to previous sessions but will still be packed with New Zealand’s Current Account; Japan’s Trade Balance; Australia’s CB Leading Index; UK MPC Asset Purchase Facility Votes and Official Bank Rate Votes; Switzerland’s ZEW Economic Expectations; Canada’s Wholesale Sales; US Current Account, FOMC Statement, Federal Funds Rate, and FOMC Economic Projections.

Thursday will start early with New Zealand’s GDP; Switzerland’s SNB Financial Stability Report, Libor Rate Announcement, Press Conference, and Monetary Policy Assessment; UK Retail Sales and CBI Industrial Order Expectations; US Jobless Claims and Philly Fed Manufacturing Index.

Friday ends the week with only a couple of economic releases such as BOJ Kuroda’s speech; Eurozone Account; UK Public Sector Net Borrowing; Canada’s CPI and Retail Sales.