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NZD and AUD Lower as Australian GDP Below Expectations

Published March 7, 2019

The Kiwi Dollar opens lower this morning dragged down by a weaker Australian Dollar after worse than expected GDP numbers yesterday. Commodity currencies were the worse performers overnight with the Canadian Dollar also losing ground on the back of a less hawkish Bank of Canada statement.

Australian GDP Disappoints

Australian GDP came in at 2.3% for the year, below market expectations of 2.7%. The weaker than expected number cast doubts on RBA projections earlier in the week that the economy would grow by 3% in 2019. Annualized growth for the second half of 2018 was just 0.9%, quite a reduction from the 3.8% for the first half of the year. It raises concerns that the RBA will eventually be forced to cut interest rates, with some Australian Banks already predicting cuts in July and August. Only a couple of hours earlier, RBA Governor Lowe had maintained his positive tone suggesting that growth would recover and policy could be held steady. The Aussie dropped by half a cent, dragging the Kiwi with it, while NZD/AUD cross rate made some ground above the 96 cent level. More potential volatility today with Australian Retail Sales, and Trade Balance numbers released at 1.30pm this afternoon.

US Trade Deficit Widens

The US trade deficit surged to $59.8B in December against expectations of $57.3B, despite President Trump efforts to lower the imbalance through a series of tariffs implemented through the year. The number raises the stakes on US-China trade negotiations with pressure on President Trump to finalize a deal to help the US export sector. The greenback ran into selling pressure on the back of this and perhaps contributed to some damage control on the NZD and AUD which found some support overnight.