New Zealand dollar recovers mildly today after RBNZ cut OCR by 25bps to 3.00%. Some analysts attributed the bounce to the perception that RBNZ wasn't as dovish as expected. A 25bps cut should be fully priced in by the markets and the decision somewhat disappointed Kiwi bears who speculated a 50bps cut. Nonetheless, the recovery is generally seen as temporary as RBNZ maintained easing bias. The central bank noted in the accompanying statement that the rate cut was "warranted by the softening in the economic outlook and low inflation." And, "at this point, some further easing seems likely." Regarding the exchange rate, RBNZ maintained that "while the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices."
In Eurozone, Greece parliament approved the second bundle of policy measures for securing the new three year bailout that is worth EUR 86b. In the 300-seaet parliament, 230 lawmakers supported the program while 63 voted against. That included, again, 36 Syriza MPs that either voted no or abstained. Nonetheless, former finance minister Yanis Varousfakis, who voted no last week, supported the measures this time. The voting result now cleared the way fro Greece to finally begin formal negotiation with EU lenders on the bailout. Separately, ECB raised the limit on Emergency Liquidity Assistance for Greek banks by EUR 900m.
While the greenback pared back some recent gains, near term outlook remains bullish so far. According to a Bloomberg survey, economists are expecting a 50% chance of a rate hike from Fed in September. But there are risks of external shock, slowdown in improvement labor market and inflation that might delay the rate hike. The survey respondents expected a 20% chance of hike in December. The chance of a hike in between is much lower as Fed would likely want to make use of post meeting press conference in either September or December to explain the decision.
On the data front, Japan trade deficit widened to JPY -0.25T in May. UK will release retail sales in European session. Canada retail sales, US jobless claims and leading index, Eurozone consumer confidence will be released later in the day.