The Non-Farm Payrolls report on Friday offered the Dollar some much needed room to breathe and the spotlight remains on the greenback at the beginning of the week. All components of the NFP report printed strong indicating further encouraging performance from the labour market which suggests that at least one part of the US economy is faring well. The health of the employment market has been the number one reason underpinning Fed's optimistic outlook and the fresh data should have supported the case of rate hike in December. However, Fed Fund Futures continue to indicate an around 40% chance of this happening which is marginally higher than the odds before the NFPs were released. This indicates that investors are still sceptical about Fed's intentions to tighten their interest rate policy even further this year.
Swiss currency reserves jumped by 3% in July. However this is not evidence of additional FX interventions by the SNB and thus no reason for incremental near-term EUR/CHF upside. Instead, this is likely the result of currency valuation effects predominantly. In addition, sight deposits - a more timely proxy for FX interventions - are practically unchanged since the French elections, indicating no FX interventions for a while.
The next RBNZ meeting takes place on Wednesday, 9 August, making it the final major developed central bank to decide on rates this month. Further, it will be the final meeting led by Governor Wheeler, whose five-year term ends on 26 September The RBNZ has kept rates on hold, at 1.75%, throughout H1-17. We expect it to continue to do so, both at this meeting and during the rest of H2-17. Indeed, recent NZD gains are likely to concern the Bank, while weaker Q2-17 CPI data support the continued use of loose monetary policy.