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Kiwi Braces for Employment Data and Federal Reserve Decision

Published August 1, 2018

The New Zealand dollar opens relatively unchanged from yesterday’s rates, however is down against the AUD following yesterday’s weak NZ business confidence report. The next 24-hours will be particularly busy and we can expect volatility from either the New Zealand Unemployment Rate announcement this morning, or the Federal Reserve Rate Decision tomorrow morning.

NZ Business Confidence Hits 10-Year Low

New Zealand business confidence fell to a 10-year low in July, with headline confidence and business views of their own prospects dropping. The ANZ business outlook survey released in July showed a net 45 percent of 340 firms expect general business conditions to deteriorate in the coming 12 months, 5 points lower than the June’s result and the lowest measure since May 2008. The concern with sustained low business confidence is the risk that firms will delay hiring and further investments. “It’s difficult to take a glass-half-full view of this month’s survey results. Firms are grappling with low expected profitability; yet with no meaningful lift in pricing intentions, it seems squeezed margins are expected to persist” ANZ said.

BoJ Keeps Monetary Policy Steady

The Bank of Japan left its interest rate targets unchanged and said it intends to keep rates low for an “extended period of time”. It’s holding the short-term policy rate at minus 0.1% and is still targeting a 10-year government bond yield at around zero percent. Speculation prior to the BoJ’s announcement was that the central bank were about to make big changes to their current policies. Instead, the Yen weakened on the dovish statement.

Announcements coming up

Todays’ focus will be on this morning’s local Q2 employment report.
Tonight we see the release of US ISM manufacturing and ADP employment data, followed by the Federal Reserve rate announcement. Rates expected to be left on hold, but with recent US economic strength, it is expected to remain on path for a further two rate hikes this year.