Thursday 17th January 2019
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The New Zealand dollar weakened as strong earnings in the US improved sentiment there and investors prepared for further delay in setting the terms for the UK’s departure from the European Union.
The kiwi was trading at 67.81 US cents at 8.30am, from 68.11 cents late yesterday, and at 52.71 British pence from 53 pence. The trade-weighted index was at 73.37 from 73.68.
Stocks in the US continued their recent gains overnight, boosted by good banking sector results. A 1 percent fall in December import prices was consistent with the slowing growth, low-inflation picture that makes further rate rises by the US Federal Reserve this year less likely. The S&P500 Index was recently up 0.5 percent.
As expected, UK Prime Minister Theresa May survived the no-confidence vote against her government this morning by 325 votes to 306. Her survival was assured after the Democratic Unionists and key Brexit rebels in her own party pledged their support, but there is no certainty as to what her next option for an improved Brexit deal is.
After the heavy defeat of her Brexit plan yesterday, markets had realised that “little had changed, at least in the near term,” Westpac said in a note before the no-confidence vote was completed.
“EU officials sounded supportive of the UK but the chances of any concessions are minor until the UK can provide some alternative Brexit plan.”
HiFX noted that that change of mood saw the pound out-performing the other G10 currencies overnight.
“The rise in the GBP comes as investors discount the prospect of a disruptive 'no deal' Brexit taking place on March 29 and start to factor in a softer Brexit, or no Brexit at all.”
Local data yesterday had also provided a mixed picture of the New Zealand economy. December retail spending had been weaker than expected, while prices at the latest GlobalDairyTrade auction were better than expected.
Against the Australian dollar, the kiwi was at 94.48 cents, from 94.68 cents late yesterday. It eased to 73.86 Japanese yen, from 73.92, 59.46 euro cents, from 59.72, and to 4.5793 Chinese yuan from 4.6109.
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