NZD/JPY giving back ground in holiday thin markets

• NZD/JPY profit-taking ensures at the start of a busy event week.
• Less committed risk-takers prefer to wait and see how the trade deal unfolds.

NZD/JPY has started out the week on the back foot, falling from a high of 68.72 to a low of 68.22, -0.66%. The cross is suffering on what is potential profit-taking and a dial back in optimism surrounding the ‘phase-1’ trade agreement between the US and China within illiquid markets while Japan and the U.S. are out on holiday.  

The Chinese press has somewhat invalidated the trade agreement between the US and China by highlighting that only a ‘partial deal’ has yet to be inked, thus leaving the door open for scrutiny and prying the implications of a possible reneging  from either side on aspects of the agreement.  

The Yen, which underperformed in last week’s close following the optimism  surrounding the trade talks can make some ground back on profit-taking while the less committed risk-takers prefer to wait and see how the deal unfolds from here on.

A packed week with key Chinese and New Zealand data

For the week ahead  will be busy for the commodity complex given the number of key scheduled calendar events which will role  it throughout the week, including Chinese economic data, such as the Trade Balance,    Industrial Production and Gross Domestic  Product. Domestically, New Zealand’s  Consumer Price index will also be critical.  

“We expect headline CPI rose 0.6% q/q in Q3, a touch below the RBNZ +0.5% q/q f/c,” analysts at TD Securities explained – Their forecast puts annual inflation at 1.4%, at the lower end of the Bank’s 1-3% target band. “While annual tradeable inflation is expected to be negative on offshore leads, domestic inflation is expected to bounce to 3% y/y on rising food/housing price pressures to 5yr highs. Upside risk to our f/c.”

Meanwhile, the market pricing for RBNZ is for 28bp of easing on 13 November, according to analysts at Westpac, with a terminal rate of 0.48%.

NZD/JPY levels