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NZD Lower, ECB Leaves Rates on Hold

Published January 25, 2019

The New Zealand Dollar has drifted lower overnight, taking a breather after its CPI driven rally on Wednesday. The Kiwi was still able to make gains against the AUD and EUR, as the Aussie was sold after the NAB raised mortgage rates across the ditch, while the Euro lost ground on the back of soft PMI data and concerns over economic growth in the region. The US Dollar was broadly stronger after recent weakness, with the market still uncertain over trade wars, the government shutdown, and Brexit negotiations. The day ahead looks fairly quiet, with the US Government shutdown still preventing the release of some key data.

Trade Wars and Government Shutdown Continue

U.S-China trade negotiations, the Federal Government partial shutdown, and Brexit negotiations continue to be the main drivers of global risk appetite, with mixed news on all fronts continuing to surface. The US Senate is likely to vote this week on bills that, if passed, could end the month-long partial government shutdown. Both the Republican and Democratic measures are expected to fall short of the votes needed to pass, likely continuing the deadlock over government funding. On the trade war front, comments from US Commerce Secretary Ross suggested that “we’re miles and miles from getting a resolution”, but added there was a “fair chance we do a get to a deal”.

ECB Leaves Rates on Hold

The European Central Bank has left interest rates and its monetary policy message unchanged, moves that were widely expected. The Central Bank further said that they expect the key interest rates to remain at their present levels through the summer of 2019 and longer if necessary. ECB head Mario Draghi acknowledged that economic growth was likely to be weaker than previously expected due to factors such as Brexit and a slowdown in China.

AUD Falls Despite Lower Unemployment Number

The Aussie Dollar initially made ground yesterday after better than expected employment numbers, before giving back these gains later in the day. Unemployment dropped to 5.0% vs market expectations of 5.1% pushing the AUD higher before running into selling pressure when National Australia Bank increased its floating mortgage rate, following moves by the other major banks last year. The move was seen by many to increase the chance of an RBA rate cut later this year.