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NZD Steady Ahead of High-Level US-China Trade Talks

Published October 10, 2019

The Kiwi dollar opens relatively flat today and will likely take further direction on trade negotiations as talks continue with the US and China. Later tonight US inflation numbers are released.

China Open to Partial Trade Deal

Trade optimism saw global stocks rise and the safe-haven Yen weaken. This was on comments from China stating they are still open to accepting a partial trade deal with the US, despite the recent blacklisting of Chinese technology firms and providing no additional tariffs are imposed by President Trump. In return, Beijing would offer non-core concessions like purchases of agricultural products such as soybeans.

Fed Split on Monetary Policy Path

Federal Reserve Chair Jerome Powell stated overnight that the central bank was “in a good place” despite obvious risks. The Fed will resume Treasury purchases in an effort to avoid a repeat of recent disorder in markets. Despite this, it was emphasized that although there will be a restart of the Fed expanding its balance sheet, it should not be viewed as a return to quantitative easing.

The FOMC minutes released this morning from their September meeting showed most policymakers supported the 25-basis point cut, citing their main concern was the lack of inflation and the risks associated with trade tensions. However, going forward they were divided with some policymakers calling for an additional rate cut, with others not seeing a further need for policy accommodation at this time.

Australian Consumer Confidence Hits 4-Year Low

Australian consumers turned pessimistic in October, with confidence touching a 4-year low as fears about the near-term economic outlook shattered their confidence. Both business sentiment and now consumer sentiment have dived this month despite the RBA cutting interest rates three times this year to a record low 0.75%, which would normally boost confidence. The AUD dipped on the announcement however has since pared losses.