The Kiwi Dollar lost ground yesterday as Business Confidence Data continued to worsen. The ANZ business outlook survey fell to a 10 year low of -50.3% compared with -44.9% in July. This is the lowest level since the global financial crisis, and the RBNZ will be concerned that this lack of confidence will weigh heavily on the economy and may increase the likelihood of them easing monetary policy. The data followed the RBNZ’s more dovish than expected announcement earlier in the month, and market reaction was to immediately sell the NZD.
Another bout of emerging market currency weakness has dampened risk appetite overnight, with the Argentine Peso, Indian Rupee, Indonesian Rupiah, and Brazilian Real all falling to multi year lows. A risk off tone entered the market which has lent support to the USD, CHF, and JPY overnight, while commodity currencies AUD, CAD, and NZD all faced selling pressure. The NZD has held up reasonably well against the AUD and CAD as weaker capex and building approvals data in Australia, and worse than expected GDP data in Canada added extra selling pressure to these currencies.
The USD was broadly stronger as consumer spending data increased solidly in July, suggesting good economic growth early in the third quarter. Personal Consumption Expenditure (PCE), the Fed’s preferred measure of underlying inflation, hit the 2% target for the third time this year.
Not much in the way of major data over the weekend, with thin trading expected on Monday due to the US Labour Day holiday.
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