The Kiwi Dollar opens half a cent lower this morning as commodity based currencies lost ground across the board overnight. The main drivers of the weaker NZD were a disappointing business confidence number from the NZIER yesterday, followed by a weaker AUD later in the day after the RBA Monetary Policy Statement. Overnight, the latest GDT Dairy Auction saw the 9th consecutive rise in prices, with the index up 0.8% from the previous auction. Elsewhere, the USD was steady after slightly better than expected durable goods data, while the GBP was stronger on news that PM May is willing to work with the Labour Party to find a revised Brexit Plan.
Falling Business Confidence Adds Weight to RBNZ Dovish Stance
Pressure on the NZD began yesterday when the latest NZIER survey showed a fall in business confidence during Q1. 29% of firms surveyed expected business conditions to deteriorate compared with 17% in the previous quarter. The drop in numbers gives last weeks dovish comments from the RBNZ more credibility, and for some, perhaps increases the likelihood of a near term rate cut.
RBA Holds Rates
The RBA held its benchmark interest rate steady at 1.5% as expected yesterday, but was less certain about the future outlook compared with previous statements. The AUD lost ground as investors looked closely at the subtle changes in the RBA statement, with the bank removing language around holding the current monetary policy stance steady. They instead stated the bank “will continue to monitor developments and set monetary policy to support sustainable growth”. Many have interpreted this as the RBA now being open to cutting rates. The AUD lost ground after yesterdays statement and remained under pressure in overnight trading.
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