NZ dollar pushes higher; Powell testimony adds to US rate-cut expectations

Thursday 11th July 2019

The New Zealand dollar rose after US Federal Reserve chair Jerome Powell put a steep US rate cut back on the table.

The kiwi was trading at 66.41 US cents at 8am in Wellington from 65.97 cents at 5pm. The trade-weighted index was at 72.71 versus 72.45.

Powell told the US House Financial Services Committee that "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook." In his half-yearly testimony, he also underscored that low inflation in the US could be even more "persistent than we currently anticipate."

Capital Economics said the greenback took a tumble as “Powell indicated that, despite the recent trade truce with China and the strength of employment growth in June, the Fed intends to push ahead with a rate cut at the FOMC meeting at the end of this month.”

Kiwibank trader Mike Shirley said the kiwi dollar – which had come under pressure earlier this week – outperformed after Powell’s testimony.

Minutes from the Federal Reserve’s June meeting also showed that officials were more concerned about the economic outlook last month and indicated they were ready to cut if necessary.

According to the CME Group's FedWatch Tool there is now a 31 percent chance of a 50 basis-point rate cut and a 69 percent chance of a 25 basis-point cut. Yesterday, there was only a 3 percent chance of a steeper cut.

Domestically, investors will be keeping one eye on electronic card spending data for a steer on how consumer spending is holding up. Economists polled by Bloomberg expect card spending lifted 0.7 percent in June after falling 0.5 percent in May.

The kiwi traded at 95.42 Australian cents from 95.32 cents late yesterday. It was at 53.09 British pence from 52.96, at 59.00 euro cents from 58.86, at 72.00 yen from 71.82, and at 4.5613 Chinese yuan from 4.5424

(BusinessDesk)

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