The NZD failed to hold yesterday’s gains following the RBNZ holding interest rates and fell back on renewed political uncertainty.
RBNZ Holds Rates, Signals More Cuts
The Reserve Bank held the official cash rate at 1.00% in yesterday’s rate decision as widely expected by markets, but said there is scope for more fiscal and monetary stimulus to support the economy and maintain inflation and employment objectives. RBNZ Governor Orr said rates can be expected to be “low for longer”. The NZD initially edged up on the announcement as there was no mention of further rate cuts this year, however the door was left open for further easing.
Formal Impeachment Inquiry on Trump Announced
House Speaker Nancy Pelosi announced a formal impeachment inquiry into President Donald Trump. Trump asked Ukraine’s president in a July phone call to investigate whether a political rival, former Vice President Joe Biden, had shut down an investigation into a gas company that employed his son, according to a summary of the call released by the Trump administration on Wednesday. The move caused initial nervousness in markets with US stocks and treasury yields falling, however markets have since shrugged off the news of an impeachment with stocks rising 0.7% this morning.
Trump on Trade
US President Donald Trump said that a deal to end the trade war with China could happen “sooner than you think” and that China were making big agricultural purchases from the US. The comments come a day after Trump criticized Beijing’s trade practices during a speech at the United Nations General Assembly, saying he would not accept a “bad deal” in US-China trade negotiations. Markets await high level trade talks to continue next month.
British PM Johnson Says He Will Not Request a Brexit Extension
Adding to geopolitical tensions is the uncertainty of Brexit, with UK Prime Minister Boris Johnson stating he would not request an extension for Britain to leave the EU beyond the 31st October deadline. This is despite, opposition leaders recently forcing through a new deal to ask for a delay to Brexit beyond next month’s deadline if it fails to secure a deal by 19th October. Johnson had previously said the government will respect the law and leave the EU on 31 October. The Pound fell on comments as chances of a chaotic Brexit increase.
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