The NZD is down very slightly from Friday night’s close of 0.6940 and has traded a relatively tight range overnight. The NZD/AUD has pushed modestly higher again amid the AUD’s China-related underperformance and is up to 0.9350 – around where it was before the dovish RBNZ May MPS. The NZD is close to flat on the other major crosses. The focus for the local market this week is GDP on Thursday morning. In the day ahead there will be another Global Dairy Trade auction, with futures markets pointing to a modest fall.
The GBP is down 0.2% with Brexit negotiations and UK political infighting still rumbling along in the background. The FT reports overnight that some British and European officials now expect Brexit negotiations won’t be concluded until November or December, with the upcoming EU meeting (June 28-29) unlikely to see much progress. While we still think common sense will prevail and the two sides will finalise a transition agreement for after March 2019, it looks like the negotiations will go down to the wire and Brexit-related uncertainty will persist for the coming months (which in turn may weigh on the GBP). The BoE also meets this week, with no change on rates expected but the market will be tuned into the Bank’s outlook; the August meeting is currently around 50% priced for a hike.
In the day ahead, the highlights will be ECB President Draghi’s speech at the Sintra conference and the minutes to the RBA’s June meeting, although we don’t expect much deviation from their recent communication.
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