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FX Update

Markets continued the risk off theme deep into the week, the Aussie and kiwi currencies reaching fresh multi month lows. Yesterday’s Fed minutes offered up no real surprises. The minutes from the last meeting hasn’t changed the pessimistic market mood. Friday mornings poor US data, with PMI and new Home Sales, has bought home the true significance and worry of the global economic downturn. New Home Sales declined for April recording the largest m/m drop since December 2018 and signals that the housing market is on a tender footing amid the crucial spring selling session. Purchases of new home sales fell 7% in April. Folks in China and the US and becoming increasingly worried about the impacts and tensions of the tariff dispute and how it could affect the long-term recovery of growth. This is according to a new report run by the (IMF) International Monetary Fund. The IMF warned markets of being to complacent of a near term negotiated trade deal between China and the US rightfully dropping its 2019 global growth forecast from 3.5% to 3.3%. The WSJ (USD) Index dropped 0.2% to 91.11 overnight as a result with the 10 year US treasury yield also extending its decline slumping to the lowest level of 2.29% since December 2017. Closer to home, in a statement by Fonterra they have dropped the 2018-2019 milk solid price from NZD $6.30- $6.60 to the bottom of the range to $6.30- $6.40. The kiwi underperformed into Thursday along with the Global Dairy Auction results posting its first index decline in  2019. UK Prime Minister May is again on the back foot with senior Tory MP’s to request a rule change to allow a vote of no confidence in her leadership. Her departure seems imminent now with her new Brexit deal being pooh-poohed by her own party. She will outline changes to the Withdrawal Agreement Bill and has promised to give MP’s a vote on holding another referendum.

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