ForexLive Asia-Pacific FX news wrap: RBNZ hold/China CPI up/USD gain on Trump tariff tease Global markets reacted to a mixed bag of economic data and geopolitical developments today, with the US Dollar experiencing gains amidst ongoing tariff concerns and central bank decisions. The Reserve Bank of New Zealand (RBNZ) held its official cash rate steady at 3.25%, a decision anticipated by the market, but the bank signaled potential future rate cuts if inflation pressures continue to ease as projected. This decision followed a Reuters poll indicating a strong expectation of an RBA rate cut in August, with further easing likely by year-end. UBS analysts highlighted that emerging market stocks were not fully accounting for the risks posed by potential US tariffs, suggesting a significant underestimation of the impact. The PBOC set the USD/CNY central rate at 7.1541, slightly below the estimated 7.1806, reflecting ongoing efforts to manage the currency.
Donald Trump continued to drive market volatility, announcing plans to release tariff details for seven or more countries on Wednesday morning. This announcement, coupled with speculation that tariffs could rise to 20%, fueled market uncertainty and contributed to the USD/JPY’s climb above 147.00. Several events underscored this volatility. A private survey revealed a substantial build in U.S. oil inventories, defying expectations of a draw. Meanwhile, China’s June CPI rose by 0.1% year-on-year, exceeding forecasts, while PPI plummeted by 3.6% year-on-year, marking the largest drop since July 2023. These diverging economic signals from major economies created confusion and impacted currency valuations.
Adding to the complexity, speculation surrounding Kevin Hasset, an emerging contender for the next Federal Reserve Chair, gained traction following meetings with Trump. WallStreetJournal reports highlighted this development, further contributing to market uncertainty. Geopolitically, the White House is considering providing Ukraine with another Patriot air defense system, while Taiwan conducted its largest-ever military exercises, escalating tensions in the Asia-Pacific region. Market sentiment was further influenced by significant inflows into gold ETFs, a five-year high, driven by trade war anxieties. Goldman Sachs revised its S&P 500 forecast upwards to 6600 from 6100, and J.P. Morgan increased its EMFX overweight call, citing overbought signals. Finally, a private survey of U.S. oil inventories showed a large build, in stark contrast to the draw that had been expected. The official government data is due during U.S. hours—let’s see if the surprise is confirmed.
From China, June inflation data showed y/y CPI rising for the first time in five months, though only by 0.1%. Meanwhile, PPI deteriorated sharply, falling 3.6% y/y—its biggest drop since July 2023. The Reserve Bank of New Zealand left its cash rate unchanged at 3.25%, as expected. In its statement, the RBNZ noted that if medium-term inflation pressures continue easing as projected, the policy committee anticipates further rate cuts. NZD/USD initially popped higher but later gave up gains as broader U.S. dollar strength returned. The Wall Street Journal reported that Trump adviser Kevin Hasset is emerging as a serious contender for the next Federal Reserve Chair, having met with Trump twice in June to discuss the role. In geopolitics: The White House is considering sending another Patriot air defence system to Ukraine. Taiwan launched its largest-ever military exercises, underscoring growing tensions in the region.
