RBNZ rate pause drives NZD lower, while the FTSE miners lags on Chinese real estate concerns

• Mining stocks drive FTSE underperformance on Chinese real estate concerns
• RBNZ keep rates steady, driving NZD lower
• Dollar on the rise as we await GDP and PCE releases

A mixed bag for European markets has seen the FTSE 100 lag its mainland counterparts, with mining stocks coming under pressure as Chinese concerns re-emerge thanks to yet another real estate warning sign from Country Garden. The Chinese developer Country Garden received a liquidation petition after a non-payment on a $205 million loan, setting back government efforts to restore confidence in the beleaguered real estate sector. The weakness seen across the Australian ASX miners has been replicated in London, with declines in iron ore particularly showing recent demand concerns on a weak Chinese economic outlook.

The RBNZ opted against a surprise rate hike, with suggestions of a possible 25-basis point hike being allayed on increased confidence that inflation is gradually moving in the right direction. With the NZD finding itself as the big underperformer this morning, traders will be questioning whether this is a breather or the beginning of a more protracted move lower for the Kiwi. The elevated nature of New Zealand inflation remains a problem that will likely delay any rate normalization, and thus the Kiwi dollar looks likely to find its feet before long.

The dollar has found itself on the front-foot in early trade today, with traders largely casting aside yesterday’s weak core durable goods and consumer confidence data releases. A 16-month low for the US core durable goods orders would ordinarily point towards a more proactive approach from the Fed, but traders are instead awaiting the week’s big-ticket core PCE inflation gauge to set direction. The continued struggles faced by the Fed in driving prices down to target continue to dampen calls for a swift and rapid decline in the Fed Funds rate, which appears to have been pushed back to June. Today sees the first revision to the US Q4 GDP metric, while appearances from FOMC members Bostic and Williams provide potential drivers of volatility later in the day.