XE Morning Update

The NZDUSD opens at 0.6613 (mid-rate) this morning.

The much awaited Phase 1 trade deal between China and the USA has now been signed. The deal requires China to buy increasing amounts of US Goods and services, including agricultural products and US Oil. Details are still being released but it is unclear at this stage what China has gained from the deal. Existing US Tariffs will stay in place until phase 2 talks begin but there is no timeframe set for these to start.

The deal looks slightly positive for the US and maybe China gains some breathing space from ever rising tariffs. There has been minimal reaction in the market and all eyes will now be on where China set their currency today as the deal is rumoured to have clauses in it in relation to currency depreciation. Over the past 18 months China has simply devalued their currency to fully offset the value of any US Tariffs, so where they let their currency settle will be key going forward.

In the markets the Australian Dollar is slightly stronger and the NZ Dollar is slightly weaker after the trade deal has been signed, reflecting China's commitment to buying more agricultural products from the USA. This has seen the NZDAUD cross rate drop down further into the mid 0.9570 area.

Tonight we get an update on US Retail Sales. Over the past year it has been the consumer sector that has underpinned the US economy so it will be interesting to see if this strength continues.

Global equity markets were again mixed overnight - Dow +0.41%, S&P 500 +0.18%, FTSE +0.27%, DAX -0.18%, CAC -0.14%, Nikkei -0.45%, Shanghai -0.54%.

Gold prices are a little higher at $1,554, while WTI Crude Oil is 1.1% lower trading at $57.81 a barrel.

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