Enter the Dragon

August 24, 2026

Elias Haddad

“Economic D-Day”. China’s response to set the risk tone.

No policy relevant data due today.

NZ retail sales slump but September RBNZ hike still on track.

Check-out our Drivers for the Week Ahead for the upcoming key market shaping themes.

USD opened the week firmer against most major currencies. CAD is lagging on escalating US-Canada trade war, stocks are mixed, while crude oil and bonds are steady. The widening US growth lead over other major economies preserves the dollar’s rate advantage and offsets some of the structural drag to USD from worsening US fiscal credibility.

Treasury Secretary Scott Bessent plans to drop an “economic D-Day” against Iran today (7:00pm London, 2:00pm New York). According to Bessent it will be the “single greatest financial offensive ever marshalled against an adversary,” targeting both Iran and the foreign networks that buy and transport its oil.

China is the critical pressure point. It is Iran’s largest trading partner and buys roughly 90% of its oil exports. As such, Beijing’s response will be key to the direction of risk sentiment.

NEW ZEALAND

New Zealand retail sales volume unexpectedly plunges in Q2. Total retail sales volume dropped -0.5% q/q (consensus: 0.2%) vs. 1.0% in Q1, driven by fuel, motor vehicle and parts retailing. Excluding these volatile items, core retail sales volume increased 0.7% q/q vs. 1.1% in Q1, indicative of resilient domestic demand activity.

The next RBNZ policy decision, which also includes a fresh Monetary Policy Statement, is on September 2 and a 25bps back-to-back hike to 2.75% is virtually fully priced-in. Over the next twelve months, the swaps curve implies 75bps of tightening to 3.25%. That’s reasonable given above target inflation and a policy rate near the lower-end of the RBNZ’s neutral range (2.20%-4.10%). Still, NZD/USD upside is limited as the cross has already outrun rate differentials.

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