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NZD dips after robust US data

Wednesday 6th November 2019

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The New Zealand dollar dipped ahead of local jobs data after a lift in US non-manufacturing data eased fears that manufacturing weakness is spreading to the services sector.

The kiwi was trading at 63.82 US cents at 8am versus 64.07 cents at 5pm in Wellington. The trade-weighted index was at 70.29 points from 70.57.

The greenback got a lift when economic activity in the non-manufacturing sector grew in October for the 117th consecutive month, according to the latest report from the country's Institute for Supply Management. It rose to 54.7 from 52.6 and business activity, new orders and employment all rose.

The data fits with recent commentary from US Federal Reserve officials that the economy is in a good space, said ANZ Bank FX/rates strategist Sandeep Parekh. "The data do not yet support another Fed rate cut this year, or in early 2020," he said. 

Some of the kiwi’s losses were pared after the strong overnight dairy auction. Global dairy prices lifted 3.7 percent with whole milk powder prices up 3.6 percent to an average US$3,254 a tonne.

“These results are likely due to strong demand continuing from key markets, and some flattening off of volumes sold as New Zealand heads out the tail end of its peak production month,” according to NZX dairy analysts.

The market's focus will now shift to domestic jobs data said Parekh. He said ANZ is expecting an unemployment rate of 4.2 percent and annual wage growth to hold steady at 2.2 percent.

“The labour market lags the economic cycle and the data are notoriously volatile, but the market will look for some direction from the print, following the paring back in pricing for a November rate cut in recent weeks,” he said. Markets are now pricing a 50 percent chance of a rate cut at next week's Reserve Bank monetary policy review.  ANZ continues to expect a 25-basis point cut to 0.75 percent.

The kiwi was trading at 92.57 Australian cents from 92.83, at 49.52 British pence from 49.73, at 57.66 euro cents from 57.60, at 69.68 yen from 69.73 and at 4.4726 Chinese yuan from 4.5010.


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