Asia Morning: RBNZ “Ok Boomers” Kiwi

There are a quite a few ruffled feathers down under this morning as the Reserve Bank of New Zealand (RBNZ) refused to play ball with the market, saying “ok boomers” and holding rates steady at 1.0%, already record lows. With a procession of analysts this week calling for another 25bp cut, it was clear which way the street had positioned itself on the NZD. The Kiwi, as it is known, after our ubiquitous flightless bird, leapt 90 points after the decision, from 0.6330 to 0.6420 before settling at 0.6420.

The RBNZ, with refreshing honesty, said nothing had materially change situation-wise since the last meeting, and that the three cuts delivered this year were more than sufficient for now. Read, we have no idea how the US-China trade war is going to turn out either, so we’ll keep our powder dry for now, as the Federal Reserve has. Ever the voice of reason, if anyone had asked me if the RBNZ would cut this week, I would have said no. The reason is simple, Mrs Halley and I are in the process of buying a house in New Zealand, and we haven’t set our mortgage rate yet. Investors should always watch leading reverse indicators as closely as leading indicators. Speaking of boomers, who may or not be ok, President Trump spoke at the Economic Club in New York overnight. Markets were eagerly hoping for more insight into the state of the US and China trade talks. The street didn’t get much joy, with the President threatening to raise tariffs even higher if the US didn’t get an acceptable conclusion. The President also threatened to tariff other countries who “mistreated” the US as well. Even if the US and China reach a resolution of some kind, readers can be assured that the sledgehammer will not stop crushing walnuts, something that may play well with his support base in an election year.

With a lot of positive trade negotiation soundbites from both sides in recent times, but very little detail, it wasn’t what the street wanted to hear. The current global rally in risk assets, along with the sell-off in sovereign bonds, is entirely predicated on the premise that trade talks were progressing well, and that an interim trade nirvana is at hand. That view has gone boomer in a puff of smoke for now, and Asian shares are indicating red will be the colour of the day.

The Trump tariff-talk may well be a less than subtle negotiating tactic, reflecting his and the streets impatience with China to get something done. Trade doubts though, and the risk of recent profits going boomer, could see a long-overdue correction to the far too one-way global recovery trade. Over my many years as a pilot fish to the shark of the financial markets, one of the most important lessons I have learned is this; if it is too good to be true, it always is.

With the RBNZ out of the way, Asia’s data calendar is now empty until German inflation data at 1500 SGT and US inflation at 2130 SGT. Far more important for the region will be tomorrows China retail sales and industrial production. If financial markets continue to correct lower over the next 24 hours, a downside miss on either number give more momentum to the rush for the exit door.

A lack of data does not mean that Asia does not have issues to deal with itself. The situation in Hong Kong has taken a decidedly dark turn this week with the violence and economic disruption seemingly gathering pace. Even without the Trump comments, the region would have been nervous about the implications of Hong Kong’s situation. A Hong Kong police official was commenting overnight that the city was on the brink of a total collapse. The worries about direct intervention by Beijing and it’s implications for the region, has ratcheted materially higher, keeping Asian markets cautious at best today.


Wall Street’s major indices closed slightly higher overnight, but Trump’s comments on trade, as well as the violence and disruption in Hong Kong, have wiped out those gains. The after-hours trading on S+P and Nasdaq futures are showing a fall of around 0.25% in Asian trading.

Asian stock exchanges are a sea of red, led by the Hang Seng unsurprisingly, which has collapsed by 2.15% this morning. The Nikkei 225, Kospi and STI are all lower by nearly 1.0%. The China Shanghai Comp and CSI 300, have faired slightly better, but are lower by 0.40% with the ASX 200 and NZX 50 both 0.50% down.

The contagion regionally will almost certainly spill over into early European markets as well with what looks a potentially ugly correction in the recent global equity rally now a genuine possibility.


The NZD has been the star of the show today post the RBNZ holding rates unchanged. The Kiwi has risen 1.20% to 0.6410 after spiking on the decision. The fact that the Kiwi has continued to keep most of its gains, implies that the market is still short, and that the squeeze can continue higher. The 0.6450 region though, remains formidable technical resistance.

Elsewhere the dollar has yet to benefit from the risk-off tone sweeping equity and commodity markets this morning, with the dollar index almost unchanged, up 0.03% at 98.34.

Against regional currencies, though the dollar has risen. USD/CNH rose 200 points to 7.0250 overnight following President Trump’s remarks and has maintained those gains this morning. The dollar has increased by O.20% against the trade-sensitive KRW and MYR this morning to 1169.00 and 4.1490 respectively. The dollar will likely remain firm against regional currencies for the remainder of the day.


Oil fell in late North American trading following President Trump’s remarks on trade and tariffs. Brent crude edged lower by 0.20% to $62.00 a barrel and WTI fell 0.10% to $56.80 a barrel. That pattern has continued this morning in Asia as trade and Hong Kong fears combine to sap confidence. Both contracts have eased by 20 cents to $61.80 and $56.60 in morning trading.

Oil prices are particularly vulnerable to trade sentiment, having been a significant beneficiary of the rotation into the global recovery trade in the past few weeks. That fact should mean that oil remains a heavy crude, and not a light one, for the remainder of the session.


Gold fell from $1455.00 an ounce to $1445.00 overnight and looked poised for further losses until Trump’s tariff comments saved it. It then rallied back to $1455.00 to close unchanged on the day.

This morning, gold has picked up a slight haven tailwind as markets watch Hong Kong with trepidation, rising o.10% to $1456.00 an ounce. The bounce is hardly impressive though, and I would frankly, have expected more. The inability to stage a meaningful rally on what should be positive gold developments, implies that long positioning is still outweighing buyer sentiment even at these levels.

Gold has now had two daily closes below its previous long-term technical support at $1460.00, which is a bearish development. Gold’s next technical support is at $1440.00 and then $1400.00 an ounce. Above $1460.00, the next resistance is at $1480.00 an ounce and this level, in particular, has a fortress-like appearance. Overall risks to gold appear to be still skewed to the downside.

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.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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