- First quarter GDP in New Zealand meets expectations, the kiwi remains on the back foot though
- UK PM Theresa May wins a Brexit ’meaningful vote’, lawmakers have been stripped of the power to intervene if no deal is reached
- Iran nods to a small production increase, FT reports Saudi Arabia may target a 600-800kbpd collective rise
Asian trading is bringing quite a heavy sell-off of the NZ dollar even as the GDP release for the first quarter met expectations. Growth during the first three months of 2018 totalled 0.5% and 2.7% in quarterly and annual terms respectively. Both figures turned out to be in line with the median consensus, albeit there was a slowdown compared to the fourth quarter. Having said that, given what is happening elsewhere no one should be caught by surprise as global growth seems to begin going off the boil while major central banks continue monetary tightening.
The breakdown of the release suggests that the major culprit of the slower growth was net exports deducting over 1.4pp from growth in the last quarter. On top of that, there was also more lacklustre consumption, in turn inventories added a small portion to growth. The NZ statistics bureau said that at the industry level 13 out of 16 industries increased this quarter. Underperformance of the kiwi seems to be particularly cryptic given that prior to the release expectations had suggested growth would have slowed down more severely. It did not materialize though, but the NZ dollar is trading 0.65% lower as of 6:50 am BST being by far the worst currency in the whole G10 spectrum. From a monetary policy standpoint the data has been neutral and the RBNZ is very unlikely to tinker its guidance this year. Market participants price in just 11% chances for a hike till the end of 2018.
Either way, the kiwi is currently plodding in the vicinity of a crucial support from where buyers might decide to involve in the market. If so, and if the US dollar appeal wears off, one may count on a bounce at least toward 0.7060. Source: xStation5
Yesterday there was an important voting in the UK House of Commons where MPs rejected a motion that would have strengthened the power of lawmakers to intervene if no deal is reached with Brussels before Brexit in March next year. Notice that such a move was undertaken by some rebels within Theresa May’s government. MPs voted by 319 to 303 to reject an amendment to the EU withdrawal bill setting the legal framework for Brexit. Winning this voting might be regarded as a tremendous relief for UK Prime Minister struggling to keep unity in a deeply divided government. The vote was a bit GBP positive, but no long-lasting moves were occurred afterwards. The GBP keeps trading at 1.3150 against the US dollar as of 7:00 am BST Thursday, and ahead of the Bank of England decision where no changes are expected.
The OPEC meeting kicks off today, hence stay vigilant as some headlines may pop up during the day until the final agreement is hammered out. For one, we were offered revelations that Iran, which earlier along with Iraq and Venezuela excluded any production rises, signals it could agree on a small output increase. Furthermore, yet prior to the above-mentioned remarks Financial Times reported that Saudi Arabia targets a collective out-turn increase of 600-800kbpd adding the target is not yet finalised. Brent prices are 0.6% down while WTI is falling 0.4% as of 7:04 am BST. Notice that the latter was underpinned yesterday by a heavy slump in inventories even as gasoline stockpiles continue to pile up.