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Australia
The Australian Dollar remained under massive pressure at the close of the week. Against its counterparts it has earned the tag of the worst performing currency next to the English Pound falling 3.5% versus the Japanese Yen. Aussie CPI bounced back in the second quarter 2019 to 0.6% after a flat result in quarter one, although underlying inflation remains well below the RBA’s target of 2-3%. We think a further cut of 25 points is likely before the end of the year but not likely at today’s RBA announcement. Anything past 0.75% will depend on upcoming economic data releases with RBA’s Lowe not writing it off. Iron Ore prices have come off from late July prices around 120.00 per ton to trade around 102.00 today, but the biggest threat to the Aussie appears to be the “risk off” sentiment affecting commodity based currencies as new President Trump trade war fears surface again with the US adding new tariffs (10.0%) to 300B worth of Chinese products beginning 1 September. On the positive front Retail Sales published up on expectations Friday after a print of 0.4% from the 0.3% surprising markets. Any small boost to the AUD was overshadowed by Trump news. Crucial consumer sentiment prints tomorrow before unemployment figures Thursday.
New Zealand
The New Zealand Dollar continued its fortnightly quest lower last week dropping across the board against most currencies – over 3.4% versus the Japanese Yen. Uncertainty gripped the kiwi as punters pondered if the Fed would indeed drop rates again in 2019. The RBNZ are widely forecast to cut the cash rate to 1.25% this Wednesday with recent consensus growing that they may cut again later in the year. The ANZ Business Confidence index released at -44.3 much lower than was expected, the lowest since 2008. This data also highlighted possible weaker inflation expectation targets possibly around 2.0% whereas the RBNZ are looking towards a target of 3.0%. Prospects are not yet priced in for a 50 point cut from the current 1.5% but they soon will be. Today’s unemployment rate came in at 3.9% surprising markets after 4.2% was expected for the June quarter. The fall in the unemployment rate reflected a fall of 9,000 in the number of unemployed bringing the total unemployment number down to 109,000 in New Zealand. Read more