NZ dollar edges up vs Aussie on weak Australian data; all eyes on ECB, UK, Comey

Thursday 8th June 2017

The New Zealand dollar got a slight lift against the Australian dollar after weak trade data across the Tasman but was largely treading water ahead of the European Central Bank meeting, testimony from former Federal Bureau of Investigation director James Comey and the UK election.

The kiwi rose to 95.36 Australian cents as at 5pm in Wellington from 95.08 cents late yesterday, and gained to 71.96 US cents from 71.69 cents.

Australia posted a seasonally adjusted trade surplus of A$555 million in April, compared with a surplus of A$3.17 billion in March, the Australian Bureau of Statistics said Thursday. The figure was lower than analysts’ expectations for a surplus of A$2 billion. The kiwi has been faring better against the Aussie as the local economic outlook is rosier than across the Tasman.

"The trade numbers had a little bit of an impact … but, we are in a holding pattern right here and right now as there are some big events coming up in the 24 hours. Markets are just sitting on their hands, waiting to see how that all plays out," said Phil Borkin, an economist at ANZ Bank New Zealand.

The ECB will hold its policy meeting in the Estonian capital of Tallinn, with the policy announcement due at 1145 GMT, followed by President Mario Draghi's news conference at 1230 GMT, according to Reuters. Given that no policy change is expected market players will be focused on whether it signals a more hawkish outlook. The kiwi continued to hover near a six-week high ahead of the meeting, trading at 63.98 euro cents versus 63.65 cents late yesterday.

While testimony from the former FBI director has been published, ANZ's Borkin said Comey's Senate appearance later in the day will garner interest as it will depend on the questioning. Investors will be watching for any hints US President Donald Trump may have been engaged in obstructing justice, which could trigger an impeachment investigation.

Borkin said, however, the main event will be the UK election. The kiwi traded at 55.55 British pence from 55.59 pence yesterday ahead of the overnight vote. While Prime Minister Theresa May is expected to retain power, her lead over the Labour Party has been narrowing through the campaign and any negative surprise will weigh on the pound.

"If we were to see a hung Parliament or the Conservatives don't win the pound would face a few more challenges than its got already and that would cause a few ruffles through market," said Borkin.

The kiwi rose to 78.95 yen from 78.57 yen and increased to 4.8912 yuan from 4.8699 yuan. The trade-weighted index rose to 77.32 from 77.03.

New Zealand's two-year swap rate rose 1 basis point to 2.19 percent while the 10-year swap rate rose 2 basis points to 3.15 percent.

(BusinessDesk)

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