The Kiwi Dollar took another tumble yesterday, making a fresh 4 year low as more disappointing business confidence numbers increased the likelihood of a further RBNZ rate cut this year. Meanwhile the Australian Dollar fell to a decade low level of .6700 vs the USD after the RBA cut interest rates by 0.25%. The Kiwi begins the day up from its overnight lows as the U.S Dollar lost ground on the back of weaker than expected manufacturing data.
USD Weaker on Recession Fears
The US ISM manufacturing survey released overnight was much weaker than expected sending the USD lower. The reading of 47.8 is the lowest since the GFC 10 years ago and has reignited concerns of a US and global recession. The disappointing data will increase the focus on US non-manufacturing data to be released on Thursday and non-farm payrolls on Saturday morning.
Kiwi Falls on more Disappointing Confidence Data
The NZD fell to another 4 year low yesterday on the increased chance of a further cut from the RBNZ as business confidence remains depressed. Yesterday saw the latest NZIER survey, which like the ANZ survey earlier in the week, showed business confidence in decline. The NZIER said 11% of businesses reported that demand fell over the quarter, and said “the result suggests annual GDP growth will ease below 1% later this year”. This has prompted many analysts to predict another rate cut from the RBNZ this year, with some even speculating that another 0.50% cut could be on the cards.
RBA Cuts Rates
The Reserve Bank of Australia has cut the official cash rate below 1% for the first time as it battles to head off rising unemployment and boost a stalling economy. Yesterday’s cut of 25bps to 0.75%, was in line with market expectations and is the third cut this year. RBA Governor Lowe left the door open for further cuts suggesting more work may need to be done to support the economy. The AUD fell to a 10 year low of 0.6700 vs the USD after the announcement, and has not managed a bounce back like the Kiwi, which has seen the NZD/AUD make ground overnight.
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