Kiwi unable to hold gains on mixed sentiment in markets and ahead of the RBNZ rate announcement today.
Disappointing dairy auctions also weighed on the NZD with Global Dairy Trade prices down 2.6% and Whole Milk Prices down 1.7%, however volumes sold in the recent auction were the highest this year.
NZ Unemployment Drops to 11-year Low
The unemployment rate was a welcome surprise, hitting an 11-year low of 3.9% and beating forecasts of 4.3%. Wages also ticked up slightly in the second quarter to 0.8% vs expectations of 0.7%. The NZD surged higher on yesterday morning’s announcement touching a high of 0.6585 against the USD, however was unable to hold gains as tensions between the US and China grew in the afternoon.
Despite the solid jobs data, markets are still widely expecting the RBNZ to cut rates when it releases its monetary policy decision this afternoon to 1.25%.
Markets Relax as China Takes Steps to Stabilize Yuan
US stocks are up over 1% after falling sharply on Tuesday and the Yuan strengthened as China’s central bank took steps to contain its recent slide, easing concerns that currencies would be the latest threat in the US-China tit-for-tat trade war. While Trump dismissed prospects of the trade dispute being drawn out, St. Louis Federal Reserve Bank President James Bullard said the U.S. central bank may be stuck with a volatile global trade environment for years.
RBA Expect an Extended Period of Low Interest Rates
The Reserve Bank of Australia left rates unchanged at 1% in yesterday’s rate decision following two consecutive cuts, citing it will take longer than previously expected for inflation to return to the central banks 2% target. Markets are expecting further interest rate cuts from the RBA later in the year as growing trade tensions between the US and China poses a risk to the economy.
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