Thursday 26th July 2018
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The New Zealand dollar held overnight gains against the greenback, buoyed by news the US and European Union agreed to work toward zero tariffs, easing fears of a global trade war.
The kiwi traded at 68.37 US cents as at 5pm in Wellington versus 68.34 cents at 8.15am, and up from 67.90 cents yesterday. The trade-weighted index was 73.27 from 73.04 yesterday.
In a joint statement, following EU President Jean-Claude Juncker's visit to the White House, he and US President Donald Trump said they had agreed to "work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods." The two also said "we want to resolve the steel and aluminum tariff issues and retaliatory tariffs." Among other things, the two will immediately create an "Executive Working Group of our closest advisors to carry this joint agenda forward."
Fears of a deepening global trade rift had weighed on the kiwi in recent weeks and Imre Speizer, head of NZ strategy at Westpac Banking Corp, said it gained overnight on expectations surrounding the meeting and then "the news that came out probably surpassed those expectations and it (the kiwi) had a good run as a result of that."
Speizer said the European Central Bank’s policy decision due later on Thursday was unlikely to garner much interest as it is expected to repeat the message that bond purchases will start tapering by year end with no hikes until the European summer next year.
He said the main event will be second quarter US gross domestic product due Friday. Economists expect 4.3 percent growth, according to MarketWatch, which would be the fastest since the third quarter of 2014. If it tops 5.2 percent as some are forecasting, it would be the strongest since the third quarter of 2003.
The kiwi traded at 58.28 euro cents from 58.13 cents yesterday and edged up to 51.78 British pence from 51.65 pence. It rose to 75.75 yen from 75.53 yen yesterday and gained to 4.6276 Chinese yuan from 4.6148 yuan.
New Zealand's two-year swap rate was unchanged at 2.12 percent and 10-year swaps were unchanged at 3.04 percent.
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