The NZD bounced back overnight, gaining half a cent after earlier touching on a 30 month low during yesterdays trading. Driving the resurgent Kiwi was broad US Dollar weakness and a bit more stability in emerging market currencies. Other commodity currencies haven’t fared as well, with NZD/AUD and NZD/CAD cross rates both higher this morning.
The US trade deficit rose to a five-month high in July, which included record deficits with both China and the EU. The gap with China hit a record monthly high of -US$34.1 billon, which has raised concerns that whatever President Trump is doing to cut it back isn’t working. Investors are likely to remain cautious with the real possibility that Trump may go ahead with his proposed tariffs on $200 billion of Chinese goods when a public comment period on the taxes concludes later today.
Australia GDP for the June quarter has come in more positive than markets were expecting with real growth up 3.4% pa vs expectations of 2.8%, and up from the March growth rate of 3.2%. This gave a temporary boost to the AUD, but the rally was not able to be sustained overnight with the Aussie giving back all of its gains. Many analysts have commented that the positive data is backward looking and concerns over the Australian economy remain in place.
GBP has made ground overnight after reports that Germany had indicated it was prepared to make major compromises on the Brexit deal. This has potentially opened the way for the UK to strike a deal with the EU. The Pound gained over 1% on this news, before giving back some of these gains when a conflicting report suggested that the German government hadn’t changed its position on Brexit negotiations.
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