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Kiwi Firmer as USD Weakens on Rate Cut Expectations

Published February 28, 2020

Markets remain firmly focused on Coronavirus developments with economic data largely taking a back seat at the moment. Global equities have continued to fall, oil prices are down, and US Treasury rates are approaching record lows. On the currency front the US Dollar has been hit overnight amid concerns the virus is already spreading across the Country. The NZ and Australian Dollars have recovered some of their recent losses on the back of the weaker USD.

USD Lower on Rate Cut Expectations

The US dollar is down against most majors today as markets bet that the US Fed will cut interest rates to help soften the expected coronavirus blow to the world’s largest economy. Markets have fully priced in a 25-basis point rate cut at the next Fed meeting in April. Better than expected durable goods and steady GDP data released overnight did little to support the USD.

NZ Business Confidence

Yesterday’s ANZ business confidence survey showed a worsening outlook, although was a little better than expected, but still down from the previous reading. A net 12% of local firms expect stronger activity for their own business for the coming year, compared to 17% last month.

The Day Ahead

The main data event will be Chinese Manufacturing PMI to be released tomorrow. The question being how much it has dropped given the widespread travel bans and factory shutdowns due to the Coronavirus outbreak. The data is released tomorrow afternoon NZ time, so wont impact markets until Monday morning’s opening.