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NZ dollar takes a breather as data, Fed comments offer no surprises

Thursday 11th April 2019

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The New Zealand dollar was little changed after the US Federal Reserve reiterated its patient rate stance and local and Chinese data came in as expected.

The kiwi was trading at 67.62 US cents at 5pm in Wellington from 67.61 at 8am. The trade-weighted index was at 73.24 points from 73.33.

The Federal Open Market Committee reiterated that it will remain “patient” about raising interest rates and noted muted inflation pressures. Just after its comments were published, figures came out showing core consumer price inflation eased to 2 percent in March, the smallest increase since February last year.

“A lot of the market would have been gearing itself up for some excitement” on the FOMC announcement, but that didn’t eventuate, says Mike Shirley, a senior dealer at Kiwibank.

“There was nothing new, no new insights.” 

Local food price data for March showed a 1.2 percent increase from the same month last year, while Chinese data showed March consumer prices were 2.3 percent than a year earlier. Producer price inflation was also up 0.4 percent from a year ago, picking up for the first time in nine months and easing fears of deflation in the world's second-largest economy.

Shirley says all the data met expectations so there was little market reaction.

The market was similarly relaxed about the latest Brexit headlines, that the European Union has agreed to extend the deadline for the UK's departure until Oct. 31.

That’s the second extension and British politicians appear no closer to agreement on how Britain should leave the EU, other than they don’t want to crash out with no agreement on trade, migration and other matters - known as a “hard Brexit.”

Shirley says there’s little on the local calendar with the potential to move the market until the March quarter Consumers Price Index next Wednesday. That is particularly in light of the Reserve Bank’s newfound dovishness.

“A bit of calm is not necessarily the worst thing in the world, given the volatility we’ve seen,” he says.

The New Zealand dollar was at 94.43 Australian cents from 94.30, at 51.59 British pence from 51.63, at 59.95 euro cents from 59.96, at 75.11 Japanese yen from 75, and at 4.5401 Chinese yuan from 4.5395.

The New Zealand two-year swap rate rose to 1.6745 percent from 1.6491 yesterday while the 10-year swap rate fell to 2.2400 percent from 2.2525.


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