RBNZ: Reserve Bank Has No Intention To End FLP Early, Says It's Working As Expected
In response to a series of questions asked by interest.co.nz, the RBNZ said that it will not be ending its Funding for Lending Programme (FLP) early, despite inflation running at a three-decade high.
- The FLP will stay in place until its scheduled rollback in December "to ensure this tool remains credible for future use if required." The Reserve Bank's spokesman said it has worked broadly as intended.
- The Programme was launched in December 2020 to add monetary stimulus by allowing eligible banks to borrow money directly from the central bank at the official cash rate (OCR).
- The Reserve Bank's spokesman added that the OCR remains the primary tool for adjusting monetary policy settings, while the FLP will be assessed as part of the ongoing Monetary Policy Remit Review.
- Note that the RBNZ has recently come under increased political pressure, as the opposition called for a public inquiry into its pandemic response, while a suite of former officials criticised the Bank for policy errors.
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KRW: 1 Month USD/KRW Up From Multi-Week Lows
1 month USD/KRW couldn't below 1280 post the Asia close, spending much of this period drifting higher, as equity sentiment softened. We closed at 1285.82, note onshore spot ended yesterday at 1286.50.
- The equity leads are less positive for Korea today, with the SOX (-0.18%) and MSCI IT (-0.52%) indices falling overnight, as part of a broader tech underperformance theme. These modest losses follow strong gains last week.
- To recap, the Kospi gained 1.5% yesterday, the Kosdaq 2.7%. Offshore investors bought a further $199mn of local equities. This brings net inflows for the last 2 sessions to $467.50mn. This is the best 2 day run of inflows since the start of the month.
- Inflation remains the key domestic onshore focus. Yesterday it was announced that fuel costs will rise for Q3 (+5 won/kWh), while gas prices will also rise for households and commercial use (+1.11 won per megajoule).
- Local businesses are also warning of job losses if union minimum wage increase demands are met. Labor unions are looking for a 18.9% increase, while businesses want a freeze. Negotiations are required to end by early August.
- The data calendar just has retail sales on tap today for May, while early tomorrow morning, consumer confidence will print for June.
JGB TECHS: (U2) Off Lows, But Still Fragile
- RES 3: 151.13 - High Mar 3
- RES 2: 150.44 - High Mar 14
- RES 1: 150.14 - High Apr 1 and key resistance
- PRICE: 148.45 @ 16:19 BST Jun 27
- SUP 1: 147.15 - Low Jun 14
- SUP 2: 147.08 - 3.0% Lower Bollinger Band
- SUP 3: 146.82 - Low Jul 14 2015
JGBs faded off last week’s highs on Monday, putting a modest end to the corrective bounce last week. The outlook remains negative after JGB futures showed below the 1.0% 10-dma envelope for the first time since the depths of the COVID-19 crisis, touching 147.15 on the pull lower. The next downside level crosses at 147.08, the 3.0% lower Bollinger Band ahead of 146.82 - the low from July 14th 2015.
NZD: Kiwi Loses Some Altitude, Tracking Swings In Broader Market Mood
NZD/USD meandered at the start to the week, driven by fluctuations in broader risk sentiment rather than any domestic developments, but finished the day as one of the worst G10 performers.
- The rate dropped to an intraday low of $0.6282 in the London/NY crossover but rebounded sharply, only to ease off later in U.S. hours.
- Cross-asset signals were mixed. BBG Commodity Index edged higher, while the VIX Index slipped, as did U.S. equity benchmarks.
- With the rate last seen -5 pips at $0.6297, bears need a clean break below $0.6244, which limited losses on Jun 22, before setting their sights on Jun 14 low of $0.6197.
- The topside on Monday was capped by $0.6327, which kept a lid on gains last Friday as well. A clearance of that level would bring Jun 16 high of $0.6396 into play.
- As flagged yesterday, there is little of note on the local data docket until Thursday, when ANZ will publish the latest Business Outlook Survey.
- Worth adding that the RBNZ said that its Chief Economist Conway will speak at National Property Conference on Thursday.
