The Kiwi Dollar is sharply lower this morning losing ground against the USD after better than expected US data overnight. The Greenback is stronger across the board and the Dow Jones Index is trading near record highs. The NZD is down 1% vs the USD, and also lower on all other major cross rates.
US Fed rate hike expectations were bolstered by surprisingly strong US data last night. The latest ADP private sector employment report showed employment spiked by 230,000 jobs in September, well ahead of the expected increase of 185,000. Adding to the USD momentum was a much better than expected ISM non-manufacturing index number, which climbed to 61.6 in September vs expectations of 58.3, and up from August’s 58.5 result. The surprise number is a new record high for the index. Expectations for a December interest rate hike from the Fed are now priced in at an around 80%. All eyes will now turn to Friday’s US non-farm payroll data, where there will now be even higher expectations for a strong number.
Italian markets got some respite after a report showed that the government bowed to pressure from the European Union to trim its budget deficit target. Government bonds snapped four days of declines and the euro climbed against other currencies after the Corriere della Sera reported that the government will seek to contain the shortfall at 2 percent in 2021, down from 2.4 percent.
The GBP found support overnight as PM Theresa May said Britain’s post-Brexit future is “full of promise” at her Conservative Party Conference. She still believes a good Brexit agreement can be reached, but also hedged her bets saying “Britain isn’t afraid to leave with no deal if we had to”.
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