The NZD opens at 0.6505
The big news yesterday was out of the RBA in Australia, with dovish comments from the Governor Lowe setting the scene
for a rate cut in June. Pricing for a cut jumped from circa 50% up to 70%. This saw the AUD drop towards its lows, and
dragged the NZD down with it to its lowest level against the USD since October last year.
In terms of the trade war, a slight positive is that the US has softened and granted Huawei a 90-day temporary general
license. Not earth shattering, but at least not an escalation. What will be interesting will be the correlation between
the trade war and “risk off”. Historically as the trade war escalates, this hurts risk currencies like the NZD and the
AUD. What needs to be closely monitored is if this relationship breaks down, and the market starts to see trade as a
more US specific risk. There is an argument to be made that as the trade war escalates, the relative attractiveness of
trade between China and Australia especially will increase, leading to support for the AUD, and to a lesser extent the
NZD. I don’t think the market is quite there yet, but it is something that combined with commodity prices being at the
highest level since 2012, could be enough to turn the AUD around.
In other news, the Pound has had a fairly volatile day. Initially up on hopes of Teresa Mays new deal, plans to vote on
having a second vote to corroborate the first Brexit vote has failed to excite the market that any progress will be
made.
Retail sales data at 10:45 NZD will be the main domestic focus.
Global equity markets are generally higher overnight, - Dow +0.77%, S 500 +0.86%, FTSE +0.25%, DAX +0.85%, CAC +0.50%, Nikkei -0.14%, Shanghai +1.23%.
Gold prices are little changed at $1,274 an ounce. WTI Crude Oil prices are also flat, trading at $63.02 a barrel.
ends