New Zealand dollar tumbles after RBNZ cut the official cash rate by -25bps to 2.75% as widely expected. More importantly, the central bank maintained a dovish stance and signalled in the statement that "some further easing in the OCR seems likely." It said that globally, outlook was "revised down" due to weaker activity in developing economies particularly in China and East Asia. Domestic economy is still adjusting to fall in commodity prices and is expected to grow at an annual pace of 2%. Headline inflation is expected to return well within the target range by early 2016. Regarding exchange rate, RBNZ noted that " further depreciation is appropriate, given the sharpness of the decline in New Zealand’s export commodity prices." And, "considerable uncertainty exists around the timing and magnitude of the exchange rate pass-through."
Australian dollar was dragged down by late selloff in US stock markets overnight. DJIA ended the day down -239.11 pts, or 1.45% at 16253.57 after initial rally. S&P 500 also dropped -27.39 pts, or 1.39% to close at 1942.04. At the time of writing, Nikkei is losing over -560 pts, or -3%, paring half of yesterday's gains. HK HSI is losing -500 pts, or -2.3%. Nonetheless, Aussie is being supported by better than expectation job data and recovers mildly. Employment in Australia grew 17.4k in August versus expectation of 5.2k. Full time jobs rose 11.5k while part-time jobs rose 5.9k. Unemployment rate dropped to 6.2% as expected while participation rate dropped from 65.1% to 65.0%.
Also released in Asian session, CPI rose 2.0% yoy in August while PPI dropped -5.9% yoy. Japan machine orders dropped -3.6% mom in July versus expectation of 3.4% mom rise. Domestic CGPI dropped -3.6% yoy versus expectation of -3.2% yoy. UK RICS house price balance rose to 53 in August.
Looking ahead, BoE rate decision is the main focus today. No policy change is expected as bank rate will be held at 0.50% while asset purchase target at GBP 375b. Attention is on the vote pattern. In particular, focus will be on whether Ian McCafferty would continue to vote for a hike or change his mind. Elsewhere, US import price, jobless claims and Canadian new housing price index will be released.