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NZ dollar rises as benign inflation data weighs on USD

Monday 14th January 2019

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The New Zealand dollar is trading firmer after benign inflation data in US on Friday affirmed expectations the central bank there will be measured in any moves to raise interest rates there.

The kiwi was trading at 68.20 US cents at 8:30am in Wellington, from 68.06 US cents here late Friday and 68.31 cents late Friday in New York – the highest close there in more than three weeks. The trade-weighted index was at 73.70 from 73.46 here on Friday and 73.71 in New York.

Equity markets and the kiwi firmed last week, even as the prospect of a sustained Federal government shutdown in the US risks slowing the world’s largest economy. Investor sentiment was boosted by promising signs in US-China trade talks and after Federal Reserve chair Jerome Powell affirmed his confidence in the US economy but signalled a more patient approach to further rate rises this year.

US consumer prices fell 0.1 percent in December, their first decline in nine months, due to lower petrol costs. Core personal consumption expenditure, the Federal Reserve’s preferred inflation measure rose 1.9 percent for the year – consistent with its 2 percent inflation expectations.

“As expected consumer prices in the US inched lower in December with Friday’s Labor Department report,” HiFX said in a note to clients today.

“The week ahead will be dominated by Wednesday’s UK Brexit vote with Labour leader Jeremy Corbyn vowing to table a vote of no confidence in the government, which could trigger a general election should Theresa May fail to gain enough support to pass her Brexit deal.” 

The kiwi dollar was buying 53.06 British pence this morning, from 53.15 pence in New York on Friday and more than 55 pence earlier in December.

UK Prime Minister Theresa May’s Brexit plan is expected to be defeated in the vote in London on Tuesday night.  Senior ministers are urging her to open talks with Labour MPs in order to try and forestall the vote of no confidence Labour leader Jeremy Corbyn has signalled for later this week if she is defeated, the Sunday Telegraph reported.

Local data this week includes the New Zealand Institute of Economic Research’s quarterly survey of business opinion tomorrow, December food prices tomorrow and December electronic card spending on Wednesday,

The New Zealand dollar is trading at 94.54 Australian cents, from 94.45 cents here on Friday. It was at 73.92 yen, from 73.70 yen, at 59.52 euro cents, from 59.05 cents, and at 4.6100 Chinese yuan from 4.5954 yuan.


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