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Market Update

EncoreFX’s daily market updates are written by our experienced and professional dealing team.

Kiwi dollar sell off

Published July 20, 2018

By Phil Lynch

The rollercoaster ride has continued for the NZ dollar and the NZDUSD hit the steep downhill part overnight. The kiwi tumbled more than 1% in the overnight session, only to claw back some of those losses on the back of Trump comments.

The move lower in the kiwi was driven by US dollar bulls, who are fixated on rising interest rates in the US. However, it took President Trump to take the wind out of their sails when he weighed in with an interview on CNBC. Trump said a strong dollar “puts us at a disadvantage” and went on to add the Chinese currency has been “dropping like a rock”. He went on to voice concerns about the Fed’s path of interest rate hikes including comments like “I am not happy about it”.

This was not the first time Trump departed from a long-standing practice of U.S. presidents steering clear of commenting on Fed policy and the value of the dollar, a custom he dismissed on Thursday.

Kiwi Sold Across the Board

However, it wasn’t just against the US dollar where the kiwi had a bad night. The NZDEUR was down as much as 0.8% and the NZDJPY was down a massive 1.1%.  This was in part an unwinding of recent optimism surrounding the RBNZ’s inflation measure, but more about market sentiment shifting out of the kiwi and into other currencies as the interest rate environment changes.

Aussie Employment

Yesterday’s Aussie employment numbers set new records. Whilst the headline Unemployment Rate was unchanged at 5.4%, the number of new jobs created in June skyrocketed by 50,900. This took total employment in Australia to 12.573 million – the highest level on record. The AUDUSD jumped 50 points on this news but lost a lot of this ground in the overnight session.

Britain

British Retail Sales data missed expectations. The headline year on year number came through at 2.9% vs expectations of 3.7%. The miss vs expectations gives markets another reason to discount the chances of a BoE rate hike in August.

FX Hedging

Overnight, Reuters published an article on FX hedging, which highlighted how some businesses are disappointing their shareholders through their lack of effective FX hedging. At EncoreFX, we are firm believers that effective FX hedging programs will add value to your business over time. If you are interested in formalising your program, you can contact us today by emailing encorefxnz@encorefx.com or calling us on 09 941 4050.