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NZ dollar tad weaker, ECB, Federal Reserve in focus

Tuesday 23rd July 2019

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The New Zealand dollar was slightly weaker ahead of upcoming rate decisions by the European Central Bank and the US Federal Reserve.

The kiwi was trading at 67.63 US cents at 7:50 am in Wellington versus 67.74 US cents at 5pm. The trade-weighted index was at 73.92 from 74.05.

According to Reuters, traders see about a 46 percent chance that European policymakers will lower a key deposit rate by 10 basis points on Thursday to minus 0.50 basis points due to global trade tensions and tepid regional inflation. 

Meanwhile, the kiwi “fumbles around recent highs as markets pare back their expectations for aggressive easing at the upcoming FOMC meeting, allowing the USD to firm,” ANZ Bank FX/Rates strategist Sandeep Parekh said.

Markets now see a 77.5 percent chance of a 25 basis-point rate cut at the end of the month by the US Federal Reserve and a 22.5 percent chance of a 50-point cut.

US President Donald Trump stepped up his pressure on the Fed tweeting “with almost no inflation, our country is needlessly being forced to pay a MUCH higher interest rate than other countries only because of a very misguided Federal Reserve.”

Markets are also keeping on eye on the escalating international crisis after Iran seized a UK tanker last week. Overnight Iran claimed to have arrested 17 CIA spies and sentenced some to death. Trump said the allegations are “totally false.”

“Frankly, it’s getting harder for me to want to make a deal with Iran,” The Washington Times quoted Trump as saying.“It could go either way, very easily.”

OMF Treasury Manager Stuart Ive warned that if the US president is beginning to lose his patience “we should all take note” given the US is the only Western nation with available means to act against Iran.

The kiwi was trading at 54.19 British pence from 54.18 as the UK Conservative Party leadership race wraps up. Boris Johnson remains the firm favourite to take Theresa May’s place in Number 10.

It was at 96.13 Australian cents from 96.22, at 60.33 euro cents from 60.39, at 72.96 yen from 73.11, and at 4.6531 Chinese yuan from 4.6589.

(BusinessDesk)

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