The Kiwi Dollar lost further ground overnight as risk appetite weakened and the USD made gains against most major currencies. The Greenback found broad support as US Fed Chairman Jerome Powell noted a “remarkably positive outlook” for the American economy, and suggested it was on the verge of an historically rare era of low unemployment and tame prices.
Pressure on the NZD kicked off yesterday as results from the QSBO (Quarterly Survey of Business Opinion) showed yet another decline in business confidence. Also weighing on the Kiwi was another fall in Dairy Prices at last nights Global Dairy Auction. This is the fourth decline in a row and the eighth in the last ten auctions. Prices are down 14% compared to this time last year, although a lower currency has softened this blow.
The Euro was under pressure overnight as concerns over the Italian budget deficit continued to weigh on risk appetite. A war of words between the European Union and Italy over budget plans further escalated, as Deputy Prime Minister Luigi Di Maio said the Italian government will not retreat by even a “millimetre” from its 2.4 percent budget deficit target. Things were not helped later in the day after Italian lawmaker and economic head of the ruling League party, Claudio Borghi said that Italy would resolve its problems by returning to its own currency. These comments led to a fresh sell off in Italian assets as well as the Euro and European equities.
The RBA left the official cash rate at 1.50% as expected yesterday but warned the market that rising household debt and falling house prices were a concern for the economy. The AUD has lost further ground with analysts now largely pricing out the probability of any rate hike by the end of 2019. The NZD/AUD cross rate is higher this morning, gaining around 0.2% from yesterday.
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