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NZD Rallies on Reduced Rate Cut Expectations | USD Weakens on Powell Comments

Published November 1, 2019

The Kiwi Dollar opens above the 64 cent level making ground yesterday on USD weakness and lowered expectations of an RBNZ rate cut in November. Overnight we have seen the NZD give back some yesterday’s gains as a risk off tone returned to markets on renewed U.S – China trade concerns. In other news, the Bank of Japan kept interest rates steady as expected, but like the Bank of Canada yesterday signalled an easing bias going forward.

Powell Comments Weigh on USD

The Kiwi Dollar rallied strongly yesterday as the US Dollar lost ground on comments from Fed Chairman Powell who said the hurdle for interest rate hikes is very high. He said the Fed ‘would need to see a really significant move up in inflation that’s persistent before we would consider raising rates to address inflation’. The comments immediately saw the USD sold.

Trade Deal in Doubt

Market sentiment has taken a dive overnight after a Bloomberg report suggested that a long term US – China trade agreement would be difficult to achieve. The report also said Chinese officials were doubtful that a long term agreement was possible given their insistence on the removal of existing tariffs.

RBNZ Rate Cut Expectations Fall

RBNZ Official Cash Rate expectations were reduced yesterday as Westpac Bank changed its view, forecasting no rate cut in November. Expectations of a November rate cut had already been falling and now sit at around the 50% level, with many other analysts still expecting a cut this month. The Kiwi Dollar rallied on the news yesterday before falling back overnight.
More big data due out tonight with U.S non-farm payrolls and unemployment rate for October in focus.