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AUD and NZD remain under pressure

Published September 26, 2019

Author: Nick Cork

A very mixed session in the last 24 hours starting with the NZ Central Bank holding rates steady at 1%, with the Monetary Policy Committee saying that “employment is around its maximum sustainable level, and inflation remains within our target range but below the 2 percent mid-point…… Consequently, New Zealand interest rates can be expected to be low for longer.”  In this low inflation environment I think the RBNZ perhaps has a more realistic inflation band of 1% to 3% compared to the RBA’s rigid 2% to 3%. The NZD jumped half a cent on the news, taking AUD just above 68 cents with it and the AUDNZD back to 1.0700, but sellers of NZD emerged from all directions to push the kiwi from 0.6350 back towards this weeks 4 year lows, and now sits at 0.6270 and technically has had a very bearish outcome on the daily chart. The AUD also easily gave up its gains however less aggressively and sits back at 0.6750 this morning. There does appear to be quite a bit of AUDNZD action as the cross jumped back towards 1.0770 and looks set for further gains after this weeks profit-taking.

US equities shrugged off the impeachment news and after falling 100 points at the open it finished 100 points higher at the close. The UK parliament resumed business as usual with Boris Johnson yelling “come on, come on, this Parliament must either stand aside and let this government get Brexit done or bring a vote of confidence and finally face the day of reckoning with the voters.” Labour’s Jeremy Corbyn refused to engage saying they would only agree to an election once Johnson had ruled out leaving the European Union without a deal.

In Trade news, one day after giving China a hard time at the UN, he said overnight that “They want to make a deal very badly… It could happen sooner than you think. You know why they want to make a deal? Because they’re losing their jobs, because their supply chain is going to hell and companies are moving out of China and they’re moving to lots of other places, including the United States.” This has had little impact on the AUD which did not benefit from the change in tone as it’s starting to all feel a bit like ‘crying wolf.’  Australia may be further in the bad books with China after PM Morrison’s call for the WTO to change its status to China being a developed nation, as after Chinese Foreign Minister Wang Yi met with Foreign Minister Marise Payne he said that “Negotiation cannot take place under threat or at the expense of China’s legitimate right to development.” Morrison was quick to reply, saying that “The United States is our great ally, China is our comprehensive strategic partner.”

No data of note today, geopolitical risks still abound.