The Kiwi Dollar continued its recovery overnight as sentiment improved for emerging market and risk-based currencies. The NZD and AUD both reached their highest points for the month as the market temporarily moved on from concerns surrounding the U.S – China trade battle. While the trade war is ongoing, with many twists and turns still expected, there is a feeling that the NZD and AUD have perhaps been oversold on these trade fears.
Local market attention turns to this morning’s release of NZ Q2 GDP numbers. Markets are expecting a good number of around 0.8% growth for the quarter, compared to 0.5% earlier in the year, and ahead of RBNZ forecasts for another 0.5% expansion. The message is expected to be that the economy is doing nicely despite recent concerns over NZ business confidence. Data is due at 10.45 this morning, and as always has the potential to surprise.
The Australian Dollar has continued to extend on its recovery from last week’s 30 month low. The Aussie is benefitting from the boost in risk-sentiment, higher oil prices, and a weaker greenback. The Aussie has outperformed the Kiwi this week placing further pressure on the NZD/AUD cross rate which lost further ground overnight.
Mixed trading for the GBP overnight, initially touching on a 2 month high vs the USD after a surprise jump in inflation, before giving back these gains on renewed Brexit concerns. UK inflation numbers surprised markets reporting a 6 month high level of 2.7%, compared with the July reading of 2.5%. The Pound rallied on the back of these numbers before being sold off after European Commission President Jean-Claude Juncker said that the EU and UK remain “far away” on a Brexit deal. This negativity was compounded later when Irish Prime Minister Leo Varadkar said that the sides remain “no closer” to a deal than they were “in March.”
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