The Kiwi Dollar opens the day weaker across the board, falling to a 2 ½ year low overnight. The U.S Dollar is broadly stronger as Investors are once again flocking to safe-havens as increased trade tensions sparked a fresh sell-off in emerging market currencies.
Global trade tensions are once again on the table with President Trump ready to take the trade war with China to the next level as he wants to follow through on the imposition of tariffs on another $200 billion worth of Chinese goods as early as this week. Trump also criticized Canada over the Labour Day weekend and threatened to push ahead with a new trade deal with Mexico individually. Adding to USD strength was better than expected manufacturing data, with the ISM index jumping to a 14 year high of 61.3 in August vs expectations of 57.7.
No surprises from the RBA yesterday, leaving the cash rate unchanged at 1.50% as expected. The central bank once again remained neutral with very little change in language within the statement. The AUD found some temporary strength on the back of this pushing the NZD/AUD cross rate lower, before the Aussie ran into selling pressure amid broad USD strength. Direction today will likely come from this afternoon’s Australian quarterly GDP result, with economists forecasting 0.7% growth.
The overnight dairy auction saw lower prices once again, this time down by -0.7%, the fourth consecutive monthly decline. Prices in USD are now down -18% since March, and -10% since this time last year, however a weaker NZD sees the prices fairly stable in local currency. Today’s prices are actually up +1.5% in NZD terms from the previous auction.
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