ANZ Business confidence published slightly weaker adding a touch of downside vulnerability to the NZD Tuesday. Chinese Manufacturing data released at the same time down on market expectations which dragged risk currencies lower. The kiwi fell 30 points before recovering somewhat on Wednesday’s employment numbers. On the surface things looked good with unemployment nudging lower to 4.2% however the size of the workforce shrank 0.5% and raising questions as to whether the RBNZ will now lower the cash rate next week on the 8th of May. Chances range around the 50% probability for a cut at this meeting. We think the RBZN will hold for a while yet and then cut around August.
The Federal Reserve left their benchmark rate unchanged at 2.5% Thursday morning strengthening the Big Dollar as the WSJ Index which measures the strength of the US currency against a basket of 16 currencies advanced to 90.72. This is the highest level since November 2018. The Fed noted some important indicators had shifted lower over the first quarter of 2018 and that soft inflation was likely to be “transient” – he would remain patient. ADP Non-Farm Employment figures, an early look at the Non-Farm Payroll release later tonight, came in higher than markets were expecting at 275k based on 181k, close to an additional 100k more showing an extremely robust US jobs market. Friday’s NFP could be overstated by census workers working under the US govt payroll in April and May.
The bank of England announced their official cash rate overnight with the vote unanimous 0-9 in favor of keeping the rate at 0.75%. The English Pound continues to outperform its rivals in 2019 and lately pushed back above the pivotal level of 1.3000 against the greenback. This we suspect is largely due to investors forming the opinion that an orderly, less dog’s breakfast style, exit could actually eventuate.
The Aussie Dollar has again been left to defend off the crucial 0.7000 level against the US Dollar after not bouncing back from last week’s worse than expected CPI release. It has tried to edge higher since before Wednesday’s US CB Consumer Confidence but with US Dollar strength the AUD has remained under pressure. Key Building Approvals data should give markets a further look at the Australian Housing situation when it prints today but if the numbers print poor and NFP prints well we should see a significantly softer AUD. Iron Ore prices have somewhat held up the AUD this year with prices coming from 65.0 in early January to bounce to 93.65 levels. Next week’s RBA cash rate and monetary statement is Tuesday, with the CEO of the NAB bank saying he thinks a cut to rates at this stage in unnecessary and would do little to stimulate the economy, ANZ has the opposite view.