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Kiwi Rises on Hopes of Trade Deal

Published June 19, 2019

NZD rises as optimism of a trade deal returns to markets following US and China President’s Trump and Xi agreeing to meet in Japan next week for extended talks at the G20 summit.

It was previously unconfirmed whether the two President’s would meet in Japan, with China originally declining to say whether the two would sit down for talks. Trump tweeted in a post “Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting” The Kiwi rose 0.5% on the announcement.

RBA Says Further Rate Cuts “More Likely Than Not”

The AUD fell following the minutes released yesterday from the RBA June 4th rate cut to 1.25%, with the central bank believing more rate cuts are likely needed to push down unemployment and boost wage growth and inflation. “Given the amount of spare capacity in the labour market and the economy more broadly, members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead,” the minutes showed. “They also recognized, however, that lower interest rates were not the only policy option available to assist in lowering the rate of unemployment.” Markets have priced in a rate cut to 1% by August and a further cut to 0.75% by early 2020.

EUR Falls on ECB’s Dovish Comments

European Central Bank President Draghi offered the strongest indication yet that the central bank will unveil another round of stimulus if weak growth and political uncertainty continue. Draghi made the address at the ECB’s annual symposium in Portugal and went on to state that there is “considerable headroom” to launch a fresh expansion of the €2.6tn quantitative easing programme.

Sterling could also be in for a bumpy ride over the coming days, with a range of potentially market-moving events with consumer inflation and retail sales tonight and the Bank of England’s monetary policy announcement on Thursday.

Consumer Confidence Falls in June

The Westpac McDermott Miller consumer confidence index eased 0.3 points to 103.5 in the second quarter, a report showed on Tuesday. A reading above 100 indicates optimism, however sentiment remained downbeat and below average levels of 111.8, signaling a slowdown in economic growth. Market reaction was muted as focus turns to the Federal Reserve meeting tomorrow with markets expecting Powell to follow the Dove’s with an 80% chance of a rate cut in July, this announcement will then be followed by our local GDP at 10.45am