The Kiwi dollar rose overnight as risk sentiment improved following China measures easing virus fears.
China Central Bank Liquidity Boost
Global stocks and commodity currencies surged higher as China’s central bank injected USD242.74 billion via reverse repos on Monday and Tuesday, also helping Chinese stocks pare back some of the hefty losses. The move helped ease fears of a heavy economic impact from the coronavirus epidemic.
In the US, adding further optimism was data that showed new orders for US made goods rose to near 1-1/2-year highs in December.
RBA Keeps Interest Rates on Hold
The Australian dollar is the best performing currency overnight as the Reserve Bank of Australia (RBA) held interest rates at the record low 0.75% as widely expected, and was further supported by China’s liquidity measures. The central bank looked past the temporary hit to growth from the bushfires and coronavirus, however RBA Governor Lowe did acknowledge that the two events would “temporarily weigh on domestic growth” while reiterating that an extended period of low interest rates will be needed in Australia. Forecasts for 2020 GDP growth remain at 2.75%. Markets are now pricing in a rate cut to 0.5% in April and focus turns to this afternoon’s RBA Governor Lowe’s speech.
Euro Zone PPI Hits 5th Consecutive Fall
Euro zone producer prices fell in December for the fifth consecutive month, mainly driven by a less prominent fall in energy prices, which declined by 4.0 percent in December after a 6.1 percent drop in November, the EU statistics office showed on Tuesday. Overall industry prices came in flat in December, after a 0.1% rise in November, confirming market forecasts.
Focus turns to NZ employment data due out at 10.45am this morning, with unemployment expected to remain at 4.2%. This is followed by the RBA Governor Lowe speech at 2.30pm following yesterday’s rate announcement and US non-manufacturing data overnight.
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