NZ: 0800 560 006 – AU: 1800 993 100 
info@directfx.co.nz
FX News

FX Update

Contact us for a free online quote

CUT, CUT, CUT was the word from the Reserve Bank Governor Orr Wednesday after he cut the official interest rate from 1.50% to 1.00% after experts and markets alike expected only a 25 point shift lower to 1.25%. This is the second time this year the RBNZ has dropped the cash after cutting it to 1.50% in the May meeting. The main reasons for the surprising 50 point cut were, heightening global trade tensions based on the NZ economy being heavily exposed to negotiations between the US and China and uncertainty and declining international trade. Employment is sitting at maximum capacity confirmed on Tuesday after the unemployment fell to 3.9%. The RBNZ feel to sustain this they need lower inflation. Inflation expectations have been dropping as well along with soft business confidence leading to a slowdown in hiring. The New Zealand Dollar fall out of bed on the release from 0.6540 to reach a low of 0.6377 against the greenback before retracing back to around 0.6450. 

The RBA’s release wasn’t nearly as exciting as the RBNZ with their benchmark rate remaining at a record low of 1.00% for at least another month with the door still ajar for further easing after dropping rates in June and July. RBA governor Lowe spoke about a deteriorating global economy as other central banks have eased at will recently in response to deteriorating trade relations between China and the US. Lowe said global risks remain “tilted to the downside” as they are directly exposed. The RBA will continue to watch developments in the labour market and is expecting rates to remain low for a considerable period with the economy expected to grow 2.5% compared to previous forecasts of 2.75%. Strong iron ore prices are supporting the Aussie economy and is a driver in the recent trade surplus of 8B in June. The Aussie Dollar also dropped along with the kiwi on Wednesday’s RBNZ release suffering to a level around 0.6675 before reversing losses Thursday back to 0.6780.

The US Federal Reserve have three further remaining meetings for 2019 with a large number of investors now expecting a cut at each. We don’t believe this will eventuate but markets do seem overly anxious at the moment. Assistant Fed President Bullard said on Wednesday he has one more “rate cut” pencilled in for 2019 but he wasn’t sure if it would be needed. He isn’t keen to pull the trigger on another 0.25% cut and wants to gauge what the recent cut to 2.25% does to the economy. Canadian employment prints tomorrow morning and could extend the last two days of CAD performance if figures are favorable. Next week’s economic calendar looks to be another busy one with US CPI m/m, Aussie employment data and US Retail Sales the highlights.

Contact us for a free online quote

Previous ArticleNext Article