The USD eased back on Tuesday as investors grew cautious about the U.S. and China trade talks which entered the second day. The parties are focusing on producing an outline for the agreement which could be then signed off by the respective leaders. Failure to reach a deal by March 1st could potentially mean that either a new deadline must be set or the new tariffs will hit the tariffs on $200 billion worth of goods from China.
The British Prime Minister, Theresa May said that there was no breakthrough on the Brexit negotiations with the EU. However, she ruled out a no-Brexit deal and said that talks would continue.
Economic data on the was relatively quiet. New Zealand’s inflation expectations for the quarter remained unchanged at 2.0%. Japan’s tertiary industry activity declined by 0.3% against forecasts of a 0.1% decline. The declines were slower compared to the previous month’s fall of 0.4%.
The European trading session was quiet.
The Brexit Situation
Bank of England Governor, Mark Carney gave a scheduled speech where he highlighted that trade uncertainty and the slowdown from China as the most significant risks. However, Carney said that the global economy would most likely avoid a recession. The British pound did not record any significant movement on the day.
The NY trading session which saw no significant economic releases was seen highlighted by the speech of the Fed Chair, Jerome Powell. Powell delivered a speech titled Economic Developments in High Poverty Rural Communities in Mississippi.
Answering questions during the speech, Powell said that the U.S. economy looked strong. He did not make any further references to the Fed’s rate hike plans or on monetary policy.
The overnight session saw the Reserve Bank of New Zealand holding its monetary policy meeting. As widely expected, the central bank left the official cash rate unchanged at 1.75%. The RBNZ’s policy statement suggested a dovish tone as the Governor said that while the chance of a rate cut is not in the books, a rate cut could happen if growth did not pick up.
The NZDUSD managed to post strong gains after the RBNZ’s meeting. The Kiwi is currently up over 1.68% against the USD.
Looking ahead, the UK’s inflation figures will be coming out today. Economists forecast that inflation fell to 1.9% on the year ending January 2019. The core inflation rate of 1.9%, matching forecasts.
Industrial production data from the Eurozone should fall by 0.4% on the month following a 1.7% decline from the month before.
The NY trading session will see the release of the monthly consumer price index data. Reports should show that the headline inflation rate rose by 0.1% reversing the 0.1% decline from the month before. The core inflation rate should remain steady, rising at a pace of 0.2% during the month.
Later in the evening, the RBNZ Governor, Adrian Orr will speak.
