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NZD Loses Ground as Risk-Off Sentiment Returns

Published May 30, 2019

The Kiwi Dollar opens lower this morning as a risk-off tone returned to global markets with the U.S – China trade war continuing to weigh on market sentiment. The US Dollar has made further gains on the back of this cautious tone making ground against most currencies overnight. The Japanese Yen and Swiss Franc were also firm give their safe haven reputations.

China Looks at Retaliation Options

There are growing concerns over China using its monopoly in the global supply of rare-earth elements as a means of countering US trade measures. The main outlets for the Chinese Central Party have recently published reports highlighting this possibility as the country controls 80% of global supplies. These products are used in a wide range of imported consumer goods and electronics.

NZ Business Confidence Disappoints

Yesterday’s ANZ business confidence survey disappointed with only a small increase from the last reading. Many had been expecting a bigger bounce given the government’s decision to not go ahead with its proposed capital gains tax. The result had little impact on the currency. This afternoon sees the NZ budget announcement, and later tonight we have US Q1 GDP data.

RBA Rate Cut Looking Likely

Across the ditch, expectations of a RBA rate cut next week are growing. More analysts are now predicting a 25 point cut next week, and some have gone further, with one major bank predicting the RBA will cut its cash rate by 100 points by the middle of next year. The cash rate currently sits at 1.5% and hasn’t been adjusted since August 2016. The Australian Dollar has remained fairly stable above the 0.6900 level this week, although next week could be a volatile one with RBA set to announce its rate decision on Tuesday afternoon.