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NZ dollar benefits from weaker greenback; focus on domestic CPI

Monday 15th July 2019

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The New Zealand dollar dipped on weak China trade data but pared those losses as investors continue to expect lower interest rates in the US.

The kiwi was trading at 66.81 US cents at 7:50am in Wellington versus 66.90 cents late Friday in New York. The trade-weighted index was at 73.03 from 73.10. 

The kiwi shed some ground late Friday when data showed that China’s exports fell in June as the trade war with the US took its toll. China is New Zealand's leading trading partner so weaker exports are a headwind for the domestic economy. 

However, the data “prompted noise but it didn’t really last” given the US dollar remains on the backfoot, Kiwibank trader Mike Shirley said.

The US dollar is under pressure after Federal Reserve chair Jerome Powell last week solidified expectations the Fed will cut interest rates at the end of the month. Federal Reserve speakers “maintained the dovish talk” over the weekend, said ANZ Bank FX/rates strategist Sandeep Parekh.

“With numerous Fed speakers brushing off the recently upbeat data pulse while maintaining a firm easing bias, markets are all but certain that the Fed will cut rates by at least 25bp at the upcoming FOMC meeting,” he said.

Domestically, investors will be watching for the BNZ-BusinessNZ performance of services index but the main focus is on tomorrow’s inflation data.

Economists expect the consumers price index rose 0.6 percent in the three months ended June 30, for an annual increase of 1.7 percent, according to the median estimate from a poll of economists by Bloomberg. The Reserve Bank of the New Zealand is forecasting the same numbers.

Tepid inflation will add to the view that the RBNZ is also poised to cut rates from their record low 1.5 percent.

The kiwi dollar was at 95.24 Australian cents versus 95.31 cents on Friday. It was at 53.11 British pence from 53.20, at 59.24 euro cents from 59.35, at 72.10 yen from 72.17, and at 4.5942 Chinese yuan from 4.6025.


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