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Kiwi lifts from 2019 lows

Published April 26, 2019

By Phil Lynch

The NZDUSD traded as low as 0.6578 overnight – the lowest point since November 2018. This morning, however, the kiwi opens a touch higher – rebounding against all our major trading partners (except the yen).

US Dollar in Demand

The flightless bird has struggled against the greenback over the past few weeks, and kiwi weakness has been exacerbated by rising US treasury yields. The US economy is poised to show its strength tonight when Q1 GDP numbers are released. Markets are anticipating a 2.1% annualised growth rate for the first quarter, but markets have become more bullish following surprisingly strong Durable Goods orders – which came it 2.7% vs expectations of 0.8%.

Trade Wars or Trade Agreement?

President Trump has just announced that US-China trade talks are progressing well – and he expects China’s Xi will soon visit the White House. The next round of talks begin on April 30 in Beijing, with further discussions taking place in on May 8 in Washington. For now Trump is continuing to extend his truce which was due to end on March 1, citing progress in a potential trade agreement.

Aussie Inflation Follows the Trend Lower

On Wednesday afternoon, Australian Q1 inflation numbers were published at 1.3% year on year, a surprising miss from the expected 1.6%. This sent the AUD plummeting 1.3% from Wednesday’s pre-CPI levels. The RBA has previously cut rates when the inflation was this low – and markets are now pricing in a 54% chance of a rate cut when the central bank next meets on May 7.

The lower than expected inflation number has dragged the NZD down with it, and is in part responsible for the lower NZD this week.