Markets continue to act out Trump's statement regarding his intention to increase import duties on Chinese goods this coming Friday, but no panic sales have been observed. The Shanghai Composite has adjusted upwards following yesterday's collapse, the growth in demand for gold is low, the yen weakens, the S&P 500 closed at 2932.47p, which is very close to its record high.
The Caixin Index (PMI) for the services sector in China rose in April to 54.5p instead of an expected decline, and if the publication on Wednesday of data on foreign trade does not show a negative trend, then the demand for risky assets could resume at least until Friday.
The current week was seen as rather important for the AUD and NZD, since the central banks of both Australia and New Zealand are set to hold monetary policy meetings. The markets expected both of them to cut rates, since weak inflation data for Q1 in both countries would seem to leave no other way out.
However, the Bank of Australia made a surprise this morning, leaving the key rate unchanged at 1.5%. Noting the fact that the risks of the world economy are still shifting downward, the RBA highlighted the key, in its opinion, moments - bond yields are at record lows, GDP growth is expected to be at 2.75%, and even if the inflation dynamics looks negative , nevertheless, it gives hope for 2% by 2020, which in aggregate does not require any extraordinary measures.
The aussie increased following the RBA meeting, but this growth is unlikely to escalate into a long-term trend, since a number of key factors show an unpersuasive dynamic and, most likely, will still force the RBA to lower the rate at the next meeting. In particular, the negative dynamics of consumer lending, which showed a low result for 9.5 years in March, may indicate a drop in real incomes and, as a result, a decline in consumer demand.
Despite the fact that business lending is still at good levels, the slowdown in real incomes is reflected in another sector, the construction sector. The PCI index in March fell to a 5-year low of 42.6p, that is, the construction sector is in a state of deep recession. Mortgage lending is at its lowest level in the entire history of observations, the latest data on consumer confidence also indicate a negative trend.
Given the general slowdown in the global economy and a sharp increase in risks for China, the chances of maintaining the current levels of foreign trade also look low. The AUDUSD will return to decline in the near future, growth to the border of the channel of 0.7130/50 is unlikely, or rather, the formation of a local low near current levels and a decline to a support of 0.6910/20 in the future for several days.
A regular meeting of the RBNZ will be held today. The market consensus suggests a reduction in the rate from 1.75% to 1.5%, which puts pressure on the kiwi. At the same time, there are very few serious reasons for lowering the rate. The ANZ Bank sees neutral trends in the main indicators, such as GDP growth and unemployment, and risks are only declining in inflation.
If for the US, the threat of recession looms in the medium term and is expected not earlier than next year, then the New Zealand economy may show a noticeable slowdown as early as August, most Asian banks adhere to this position - ANZ, Westpac, and even Scandinavian Nordea notes clear skepticism about the prospects for the kiwi. They all agree on the assessment of key threats to New Zealand - China's slowdown, the approaching reversal of stock markets and flight from risk, the threat of a slowdown in the labor market and, as a result, the loss of momentum for consumer price inflation.
After the March meeting of the RBNZ, the kiwi lost more than 3.5%, and if today the regulator is not satisfied with a surprise, following the example of its Australian colleague, then the decline will continue. A possible increase to the border of the channel of 0.6630/35 is logical to use for selling, the immediate goal is to support 0.6539 with the prospect of a decline to 0.6475.