The NZDUSD opens lower at 0.6527 this morning.
It was a volatile day in the NZD yesterday.
Having been beaten lower Monday on increasing US-China trade war fears, the NZD rocketed higher after the release of
surprisingly good NZ employment data. Employment grew at 0.8% in Q2 (0.5% forecast), while the unemployment rate
plummeted to 3.9% (4.3% forecast) – the NZDUSD quickly rallied 60 points before drifting off and the NZDAUD surged
through the 0.9700 level to 8-month highs.
The RBNZ Q3 Inflation Expectations numbers were released at 3pm. Both the 1 & 2-year inflation expectations fell when compared with Q2, which will be of concern to the central bank. The NZD fell
across the board in response.
The Reserve Bank of Australia had a Cash Rate meeting Tuesday. They elected to hold their Cash Rate at a record low
1.00%.
The RBNZ is forecast to cut the Official Cash Rate (OCR) by 0.25% to 1.25% 2pm today in response to inflation and growth
concerns. The rate cut is largely priced-in by the markets, so most focus will be on their forward guidance with respect
to the pace and extent of further rate cuts.
The US-China trade frictions are creating a great deal of uncertainty in terms of global economic growth. Commodity
currencies such as the NZD & AUD and equity markets have suffered consequently, and it increases the probability of more rate cuts by the US Federal
Reserve.
China took steps yesterday to limit yuan weakness. This helped to provide some stability to the global financial markets
overnight. However, a resolution to the US-China trade dispute is nowhere in sight – expected more market volatility.
Global equity markets, with the exception of the US, were lower on the day - Dow +1.0%, S 500 +1.2%, FTSE -0.7%, DAX -0.8%, CAC -0.1%, Nikkei -0.7%, Shanghai -1.6%.
Gold prices gained 0.4% to USD$1,471 an ounce. WTI Crude Oil prices plunged 1.6% to US$53.79 per barrel. Both
commodities have been impacted by the intensifying US-China trade war – gold benefiting from safe-haven buying, while
Oil falling on the potential negative impact on global growth.
ends