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NZ dollar steady as markets await Fed statement

Tuesday 30th April 2019

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The New Zealand dollar is steady as markets await the US Federal Reserve's monetary policy decision and statement later this week. Local business confidence data today will garner interest. 

The kiwi was trading at 66.70 US cents at 7:50am in Wellington from 66.79 US cents at 5pm. The trade-weighted index was at 72.71 points from 72.82.

Investors are largely on the sidelines ahead of the Federal Reserve's latest monetary policy decision on Thursday morning New Zealand time. While the Fed is expected to keep rates unchanged, the statement and press conference will be closely watched for any clues on its direction as it looks to balance strong economic growth with still tepid inflation.

In recent weeks Fed officials have said they will be "patient," which has led some economists to think rates could be on hold into 2020. 

"We expect no change in the FOMC’s interest rates guidance," said ANZ FX/rates strategist Sandeep Parekh. "Inflation is below target and despite still-strong headline growth and robust momentum in the labour market, a sustained acceleration in core inflation remains elusive." 

In overnight data, the US core Personal Consumption Expenditure Price Index rose 1.6 percent on a yearly basis in March, falling short of the market expectation of 1.7 percent and moving further away from the Fed's 2 percent inflation target.

Domestically, investors will be watching today's ANZ business outlook survey to see if the mood among New Zealand firms continues to sour. However, the main domestic data this week is Wednesday's jobs data. Economists are expecting the March-quarter unemployment rate to be 4.2 percent according to the median of economists polled by Bloomberg. Wage inflation is expected to remain tepid. 

Both pieces of data will feed into expectations of what the central bank might do at its May 8 meeting, in particular after RBNZ governor Adrian Orr said the next move is likely to be a rate cut at the March monetary policy review. 

The New Zealand dollar was trading at 94.46 Australian cents from 94.85. It was at 51.54 British pence from 51.63, at 59.60 euro cents from 59.85, at 74.45 Japanese yen from 74.53 and at 4.4897 Chinese yuan from 4.4938.


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