The Kiwi Dollar opens the day up from yesterday, continuing to regain ground from the 2 year lows set earlier in the week. US Fed meeting minutes released yesterday warned of further rate hikes as committee members viewed recent economic data as consistent with a strong economy that was evolving as they had expected. Despite this, the USD was broadly weaker, with trade war concerns continuing to weigh on the currency. All eyes will be on Non-farm payroll data out this evening which will give further insight into the state of the U.S economy.
For months, talk of a trade war between the United States and China has been weighing on currency markets. At 4pm this afternoon, local NZ time, the talk will become reality when major US tariffs against Chinese goods come into effect. China says it won’t move first, but is ready to respond almost immediately after they are imposed. A US trade representative confirmed that 25% tariffs on $34b of Chinese goods are scheduled to take effect today, and China have confirmed they are ready to retaliate with tariffs on $34b of US goods at the same time. The consensus view is that these will have minimal impact on the economy, but the big question is what comes next?
Positive data out of Germany overnight, with German factory orders breaking a 4-month losing streak, coming in much higher than expected in May. This has supported the view that weaker euro-area growth earlier this year was perhaps a temporary speed bump. Meanwhile in the UK, BoE Governor Carney gave a more positive view on the economy that left the door open for a possible rate hike next month. The Pound made ground on the back of this before giving back these gains on Brexit concerns.
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