Friday 18th October 2019
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The New Zealand dollar benefited from a lift in global risk appetite after a preliminary Brexit deal was struck.
The kiwi was trading at 63.47 US cents at 7:50 am in Wellington from 62.96 at 5pm yesterday. The trade-weighted index was at 70.28 from 69.93.
European Union and UK negotiators reached a draft of a new deal on Brexit and it was approved by the EU summit in Brussels. UK Prime Minister Boris Johnson now needs to obtain enough support from the UK parliament. The vote is scheduled for Saturday.
According to the Wall Street Journal, the withdrawal agreement spells out a financial settlement, a guarantee of citizens' rights and a plan to avoid a physical border on the island of Ireland. It is accompanied by a non-binding political declaration that is supposed to set out the shape of future relations.
A "tentative risk-on tone within markets is helping to support NZ dollar performance," said Kiwibank.
“The key focus for Brexit now is Saturday’s emergency session in parliament where there will be a meaningful vote on the Johnson deal. But the PM is in a weak position,” said ANZ Bank FX/rates strategist Sandeep Parekh. According to the journal, Johnson needs 320 to approve his plan and there are 287 lawmakers in Johnson's Conservative group. Northern Ireland's Democratic Unionist Party has 10 seats and are Conservative allies. However, the DUP has said it can’t support the deal due to new provisions impacting Northern Ireland.
Meanwhile, markets were also cheered when China’s Commerce Ministry said it hoped to soon reach a phased trade agreement with the US. Reuters quoted ministry spokesman Gao Feng as saying “we hope that both sides will continue to work together, advance negotiations, and reach a phased agreement as soon as possible.”
Parekh said the kiwi also benefited as offshore markets were upbeat after better-than-expected Australian labour market data yesterday. “Kiwi went along for the ride, firming with the AUD post labour data,” he said.
The kiwi was trading at 93.00 Australian cents from 92.78 late yesterday.
With little data on the domestic front, Parekh said markets will be focused on any headlines from the US-China trade talks.
The New Zealand dollar was trading at 49.33 British pence from 49.10, at 57.06 euro cents from 56.82, at 68.98 yen from 68.48, and at 4.4932 Chinese yuan from 4.4678
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