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NZ dollar lower as USD gains on upbeat data; focus on trade, FOMC

Wednesday 12th June 2019

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The New Zealand dollar was slightly lower after improving US data buoyed the greenback and amid caution ahead of the Federal Reserve's next policy meeting and ongoing US-China trade tensions. 

The kiwi was trading at 65.81 US cents at 7:50 am versus 65.94 US cents at 5pm in Wellington. The trade-weighted index eased to 72.19 points from 72.39. 

The US dollar got a lift after business confidence data was better than expected and the producer prices index data was also firm.

"The kiwi continues to dribble lower as upbeat US data helps the USD strengthen," said ANZ FX/Rates strategist Sandeep Parekh. 

The National Federation of Independent Business index of US small business confidence rose to 105.0 for May, its highest level in eight months and up from 103.5 in April.

US producer prices excluding food, energy and trade services rose 0.4 percent last month, matching April’s gain, the government said. The so-called core PPI increased 2.3 percent in the 12 months through May after rising 2.2 percent in April. The producer price index for final demand edged up 0.1 percent after gaining 0.2 percent in April, in line with expectations. 

ANZ's Parekh said markets are now focused on what the Federal Reserve will make of the mixed global and domestic environment.

"The fact that both business and consumer confidence remain elevated is consistent with the Fed’s vigilant, wait and see approach on rates, but ongoing trade tensions have also weighed on US data and global sentiment recently."

The Fed is due to publish its rate decision early June 20 New Zealand time. 

Stuart Ive, private client manager at OMF, said markets are also looking ahead to the G20 meeting at the end of June, in particular a possible meeting between US President Donald Trump and China's leader Xi Jinping. 

"Will the trade deadlock be broken, followed by Trump trumpeting triumphantly or will the US impose an additional $300 billion in tariffs? Clearly the global markets are very concerned by this and in the lead up to the hopeful meeting between the two presidents markets are being cautious," he said. The resulting defensive positioning "usually pressures the kiwi lower."  

Westpac market strategist Imre Speizer said markets will also be keeping a close eye on Australian jobs data - due Thursday - as it will have implications for the Reserve Bank of Australia. Economists polled by Bloomberg are expecting an unemployment rate of 5.1 percent and employment growth of 16,000 positions. 

The kiwi was trading at 94.57 Australian cents from 94.74, at 51.72 British pence from 51.98, at 58.10 euro cents from 58.27, at 71.41 yen from 71.60 yen and at 4.5479 Chinese yuan from 4.5607.


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