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NZD Lower Ahead of Employment Data, AUD Sold after Dovish RBA Speech

Published February 7, 2019

The Kiwi Dollar opens the day lower, pulled down by a weaker Australian Dollar following a dovish speech from RBA Governor Lowe yesterday. The AUD and NZD were the worse performers of the major currencies both lower across the board, although the NZD/AUD cross has made good gains with the Aussie being bottom of the leader board. A much stronger than expected Global Dairy Auction earlier this morning, with prices up 6.7%, has had little impact on the Kiwi.


Governor Lowe sends AUD Lower

In Australia yesterday, RBA Governor Lowe surprised markets saying that the probabilities of a rate hike or rate cut “appear to be more evenly balanced”. This is a key change in tone from his earlier view that an increase in the policy was more likely than a decrease. A slowdown in growth appears to have forced the Governor’s hand with a real chance of a rate cut later in the year. The AUD was immediately sold, pulling the NZD down with it, with some now wondering what impact the change in tact across the ditch will mean for NZ, with RBNZ Governor Orr already conveying a similar tone of rates possibly going up or down.

NZ Unemployment Numbers This Morning

The local market returns today after the Waitangi Day holiday, to a falling currency ahead of this mornings unemployment data. The numbers, due out at 10.45am, are expected to show Q4 unemployment at 4.1%, after a surprising fall to 3.9% in Q3. A better than expected number should be positive for the NZD and lessen the likelihood of a rate cut, priced in by many for later in the year.

USD Steady After Trump Speech

President Trump’s State of the Union speech didn’t cause any ripples in the market, as he reiterated his view on border security and illegal immigration. Trump also told the US Congress a trade deal with China would require structural changes to end unfair trade practices and pushed for additional legislation that could expand his power to impose tariffs. Meanwhile, US Treasury Secretary Steven Mnuchin expressed confidence that the US and China can iron out their trade differences. Mnuchin further stated that the recent meeting with Chinese Vice Premier Liu He was very productive and a US delegation will visit China next week for trade talks.