Friday 8th February 2019
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The New Zealand dollar stuck to a tight range after weaker-than-expected domestic jobs figures and as global growth woes continue to weigh on markets..
The kiwi was trading at 67.54 US cents at 815am in Wellington, unchanged from late yesterday, while the trade weighted index was at 73.21 from 73.22.
The kiwi took a tumble yesterday when weaker than expected employment figures revived the possibility that the Reserve Bank may cut interest rates. Risk appetite was further dented overnight when the Bank of England downgraded its growth forecast for 2019 and 2020, noting that Brexit is weighing significantly on activity and that its forecasts are based on one rate hike over the next three years, said ANZ Bank FX/rates strategist Sandeep Parekh.
The European Union also downgraded its GDP forecast for 2019 and Parekh said he expects the European Central Bank to follow suit. He also noted that Dallas Federal Reserve President Robert Kaplan said fiscal stimulus from tax cuts and a government spending bill are beginning to wane, and the lagged effect of a string of interest rate hikes has yet to fully impact the U.S. economy. He expects the US economy will grow just 2 percent this year, Reuters reported.
Earlier, Prime Minister Jacinda Ardern said New Zealand's economy remains "relatively strong" but warned that slowing global growth will have an impact.
"We have strong fundamentals and are well prepared, but we need to be realistic that if the global economy slows, it will affect our economic growth," she told Business New Zealand in a speech.
On the day, investors will be watching for the Reserve Bank of Australia's statement on monetary policy. The RBA kept rates on hold earlier this week and said inflation is still expected to return to target, although progress is likely to be gradual. Markets were then surprised when the RBA governor gave speech acknowledging growing economic risks and shifted away from the RBA's tightening bias.
The main focus for the kiwi, however, will be next week's Reserve Bank of New Zealand monetary policy statement, with markets now expecting a "dovish tilt to the statement," said Parekh.
The kiwi traded at 95.13 Australian cents from 95.02. It was at 52.09 British pence from 52.24 and at 59.49 euro cents from 59.45, at 74.15 yen from 74.23 yen and at 4.5533 Chinese yuan from 4.5546.
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