Expect the Unexpected

Expect the Unexpected

On the tails of the UK referendum vote perhaps it’s best to expect the unexpected from Central Banks. Overnight, the anticipated interest rate cut from the BOE failed to materialize, sending the Pound rocketing higher and making the Capital Market landscape that much more difficult to navigate. While shading the MPC statement extremely dovish, the consistent policy stance surprised the markets, as a rate-cut had been factored.


Anticipation of a massive stimulus package continues to drive investor sentiment and the ensuing divergence in monetary policy between the Federal Reserve and BoJ continues to weigh on the YEN. Unlike previous Abenomic measures, the combination of both fresh monetary and fiscal stimulus is hoped to wake Japan’s economy up from its decade-long slumber.

However, major headwinds emanating from the Brexit fallout, not to mention the US presidential election, are more likely to turn investors guarded, despite Japan’s stimulus efforts. So expect a bumpy road ahead.


Very few major concerns regarding the Yuan depreciation as the current fixing mechanism is more market oriented, providing investors with a much needed level of transparency

In addition, policy makers have been more forthcoming with their forward guidance, which in the past has been a closely guarded secret, and investors continue to vote thumbs up.

Heading into the week’s end, CNH is trading with an offered tone,  testing 6.6900 trendline as some jitters are mounting regarding  the sudden spike on overnight funding costs of short Yuan positions.


Bond Bulls continue to drive sentiment. In the wake of BNM’s surprise interest rate cut, investors continue flocking into Malaysian Capital markets as the chase for yield dominates investors psyche. I think investors are also happy with the confidence the BNM governor Muhammad Ibrahim exudes , the rate cut surprised investors but certainly left and impressionable mark on sentiment.



The Australian dollar continued to enjoy the lofty heights above .7600  as overall risk appetite remained incredibly supportive despite the sidelined BOE while  adding another level of unwanted suspense to the BOE   August meeting.

On the data front , the China Q2 GDP provided a lift to Australin dollar after comoing in above market expectations. ( 6.7 % vs 6.6% expected)

However, most local attention fell on the NZD which fell off the ledge after he RBNZ’s announcement that it would provide an unscheduled “Economic Update” on 21 July raising concerns raising concerns that Brexit economic  headwinds my spur the RBNZ to  provide a dovish forward guidance based on  the current level economic uncertainly

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes