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An interesting 24 hours for the Kiwi Dollar saw good gains on the back of a dovish US Fed, followed by a further rally after solid NZ GDP numbers, and better than expected Australian unemployment data. Overnight the Kiwi has given back a lot of these gains, but still begins the day up on yesterday’s opening level.
NZ GDP Bounces Back
NZ GDP bounced back to 0.6% in Q4, up from 0.3% in the September quarter. The NZ Dollar immediately made ground despite annual growth coming in at 2.3% and missing market expectations of 2.5% and RBNZ forecasts of 2.7%. While the numbers were below expectations, the growth is solid and has perhaps eased concerns over the economy and raised the likelihood that the RBNZ will leave interest rates on hold for the foreseeable future and are less likely to communicate a dovish bias. However, opinion on the next RBNA move remains mixed.
Australian Unemployment Falls
The Aussie Dollar followed a similar path to the Kiwi, rallying on the back of US Fed dovishness and receiving a further boost as unemployment numbers fell in February. The unemployment rate fell to 4.9% vs market expectations of 5.0%, its lowest level in 8 years. The NZD/AUD cross rate is at similar levels to yesterday giving back any gains made yesterday in line with the path of the NZD.
Trade Talks Continue To Send Mixed Messages
President Trump has warned that the United States will not immediately lift tariffs on $250 million worth of Chinese goods even if a trade deal with Beijing is reached in coming weeks. Trade talks are set to resume next week, and Chinese officials have been pressing for a full lifting of US tariffs as part of any deal.
GBP Loses Ground Despite Positive Data
UK retail sales showed strong growth last month compared to a year before, in a sign that consumers remain unaffected by Brexit uncertainty. UK retail sales recorded unexpected growth of 0.4% in February, beating market expectations of -0.4%. The Bank of England kept interest rates steady with a unanimous vote and indicated that uncertainties over Brexit were too great to provide a clear guide to the forces shaping the economy. The MPC added the economic outlook will continue to depend significantly on the nature and timing of EU withdrawal.
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