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NZD Follows AUD Lower on Political Uncertainty

Published August 24, 2018

The Kiwi Dollar came under pressure yesterday as political turmoil in Australia drove the AUD lower, bringing the NZD with it. The local currency ran into further trouble overnight dropping another 30 points on a broadly stronger US Dollar. The NZD/AUD cross rate has surged to a 3 week high with the Kiwi not surprisingly outperforming the Aussie.

Greenback Firmer as Fed rate hikes on track

The Big Dollar made ground across the board as the Federal Open Market Committee published their most recent meeting minutes, indicating that policy makers at the bank are willing to raise rates again so long as the US economy remains healthy. The dollar is trading higher this morning against most majors as the central bank seems determined to stay the course. Markets are expecting two more interest rate rises this year.
In trade war news, the previously-announced 25% tariffs on $16bn of additional Chinese imports into the US came into effect yesterday. China has retaliated immediately with the same value of tariffs on US imports. China has also indicated that it would file a complaint with the World Trade Organisation over America’s actions.

AUD loses ground on Political Uncertainty

The AUD has been the weakest of the major currencies with political uncertainty weighing heavily. Australian PM Turnbull is likely to face another leadership challenge this afternoon. Turnbull has said he will resign from Parliament if he lost the leadership, forcing a by-election in his electorate. Also weighing on the AUD is trade uncertainty between the U.S and China.

The Day Ahead

The annual central bankers conference in Jackson Hole has begun. U.S Fed Chairman Powell is due to speak tonight (NZ time). All eyes will be on the political situation in Australia, while on the local front we have NZ Trade Balance data out at 10.45am.