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Kiwi Lower as Trade Tensions Increase, BoE raises rates

Published August 3, 2018

The Kiwi Dollar begins the day half a cent lower from yesterday as global trade tensions once again weighed on market risk sentiment. Markets in Asia have also dropped, erasing more than $220 billion off the value of the region’s stocks. The British Pound has under performed despite the BoE raising interest rates overnight.

Trade tensions on the rise

Global trade concerns are once again the main factor in currency markets, as White House officials confirmed that President Trump has increased the proposed tariff rate on $200 billion of additional Chinese imports from 10% to 25%. China have of course fired back with the Ministry of Commerce saying that “China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries”. Trump has asked US Trade Representatives to consider hiking to 25% as early as next month.

Bank of England raises rates

UK interest rates have been raised for only the second time in a decade, from 0.5% to 0.75%, the highest level since March 2009. The move will increase the interest costs on more than three-and-a-half millions residential mortgages that have variable or tracker rates. There were no other changes to the QE program, but the BoE have left the door open for further hikes.

U.S non-farm payrolls out tonight

The USD has strengthened steadily since yesterdays FOMC statement, noting that the economy was growing at a strong rate. All eyes will now be on U.S non-farm payrolls for July, due out tonight.

Closer to home we have AUD Retail Sales out this afternoon.