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Markets Opt for Safe Haven Currencies on Fresh Trade Tensions

Published December 7, 2018

Markets have returned to safe haven currencies overnight as optimism on a trade truce fades. This is following the arrest of the Chinese Huawei CFO on potential violations of US trade sanctions against Iran. Global stocks fell on escalating concerns of slowing global growth, a fresh wave of trade tensions, along with sharply lower oil prices.

OPEC Seeks to Smash Out Cuts

Oil prices have tumbled after OPEC tentatively agreed to an oil production cut aimed at propping up prices. They have delayed the decision as they wait for a commitment from Russia before deciding on the exact volumes for a production cut. Expectations are for a cut by up to 1-1.5m barrels a day and this goes against President Trumps demands of keeping production flowing in order to make oil even cheaper.

US Trade Deficit Widens to 10-year High, Private Sector Job Growth Slows

The US trade deficit hit a 10-year high in October as soybean exports continue to fall and imports of consumer goods rose to a record high, indicating the “Tariff-Man’s” measures to shrink the trade gap have been unsuccessful. Imports of goods and services rose 0.2% to $266.5 billion, a record high.

The ADP National Employment Report for private payrolls rose by 179k in November, down from 225K in October and missed expectations of 225k new jobs. The data comes ahead of the all-important nonfarm payrolls release this evening which is forecasted for 200k new jobs and the unemployment rate to hold at a near 49-year low of 3.7%.

NZDAUD hits 8-month high

The Australian dollar continued its decline following a string of disappointing economic data out of Australia over the past few days. The NZDAUD hit a high of 0.9544 overnight. RBA Governor Guy Debelle commented overnight that the central bank has room to cut policy rates from the current record low 1.50% official cash rate. The next move will more likely be a hike, however, markets have now pushed out this expectation from mid-2019 to mid-2020.