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Kiwi Lower After Employment Numbers, US Fed Leaves Rates Unchanged

Published May 2, 2019

The Kiwi Dollar opens lower today after a busy 24 hours of economic data and announcements. Pressure on the Kiwi began after yesterday’s local employment data which saw unemployment fall, but showed much weaker employment growth and wage inflation, both coming in below market expectations. Investors focused more on the negative side of the data, selling the NZD, as the numbers increased the likelihood of a RBNZ rate cut in the near term. The Kiwi did mange to claw back some of these losses throughout the day and again overnight after weaker than expected US manufacturing data, however the NZD selling resumed a few hours ago as the USD rallied after some upbeat comments from Fed Chairman Powell.

US Fed Leaves Rates Unchanged

The US Federal Reserve left interest rates unchanged overnight, commenting that there was no strong case to move rates in either direction. The Fed noted that economic activity rose at a solid rate and acknowledged that core inflation has declined and is running below 2%. The decision had little impact on markets, however it was the comments from Fed Chairman Powell that added strength to the US Dollar. Powell suggested that inflation would recover, “our baseline view remains that with a strong job market and continued growth, inflation will return to 2% over time”. Focus will now turn to Friday night’s US non-farm payrolls data.

Pound Continues Rally

The GBP was again one of the best performers overnight, as hopes of a Brexit deal continued to improve. Both the government and opposition Labour party are talking up the prospects of a compromise plan.