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Markets Await ECB Rate Decision Tonight

Published September 12, 2019

The New Zealand dollar opens a touch lower against the USD on positive US producer prices and remains in a tight range ahead of the European Central Bank rate announcement tonight.

US Producer Prices Rise

The US Producer Price Index rose unexpectedly, up 0.1% in August from July, according to the Bureau of Labor Statistics today. Final demand prices moved up 0.2% in July and 0.1% in June. On an unadjusted basis, the final demand index rose 1.8% for the 12 months ended in August. The data received little attention as focus turns to tonight’s consumer prices with forecasts of 1.8%, and retail sales Friday night.

Bets on Australian Rate Cuts Increase on Gloomy Consumer Sentiment

Australian consumer sentiment turned pessimistic in September with confidence falling 1.7% as individuals concerned about their personal finances outweighed optimists, despite signs of a recent pick-up in the housing market. The dismal data follows the business confidence and conditions report which also saw weakness. Markets are expecting a further 2x rate cuts to 0.50% by early 2020

China Exempts Some US Goods from Tariffs

China seeks to curb the impact of the trade war by exempting some US goods from the 25% tariffs put in place last year, days ahead of a scheduled meeting. On Wednesday China announced its first round of tariff exemptions for 16 types of US products. There’s still a long way to go on negotiations with over 5,000 types of US products already subject to China’s additional tariffs, however the move was welcomed as a friendly gesture by China.

The European Central Bank are expected to cut interest rates when they meet tonight by 10 basis points bringing the cash deposit rate to -0.50%, with some picking a 20-basis point cut. Markets will be watching for further details from the ECB on their rate path and whether they will restart the bond-buying programe.