by Nicholas Cork
The AUD got a nice boost yesterday after the New Zealand Central Bank appeared to shift to a more neutral stance, reinforcing the unlikelihood of a rate cut any time soon. Traders must have been betting heavily the other way as the NZD shot a full cent higher within 5 minutes, dragging the AUD with it to test 0.7130 before easing in overnight trade. The euphoria was wide spread yesterday as Asian equities were busy rallying to 4 month highs on the sniff of a trade deal, helped by the unwinding of risk averse trades and a fall in the volatility index, or fear index, to 4 month lows.
US data again surprised with it’s strength as CPI printed 0.1% better than expected, and with the FED flagging a focus on inflation, potential rate hikes in the US could be back on the table if the trend continues. Google announces they will spend 10 BIO USD building data centres across the USA initially creating 10,000 construction jobs, so more announcements like this should continue to keep inflation ticking. Oil gained again overnight as the Saudis announced cuts to oil exports and even deeper production cuts, however it may be too little to late as US crude inventories rise to their highest levels in 15 months, and the International Energy Agency is seeing global supply outpacing demand in 2019.
So we start today with the AUD giving back all its RBNZ inspired gains, and the NZD has given back half of their gains also. Chinese Trade data is due out today, and I expect any surprise would be in a strong result for them. AUD still remains within 0.7050/0.7150 until further notice. AUDNZD is sitting near 2 year lows this morning.
AUD and NZD last 24 hours (REUTERS)
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