The NZD begins the day barely changed from yesterday, holding steady despite a risk-off tone returning to markets. The Kiwi did attempt a rally last night, up toward the 66 cent level before easing back to yesterday’s opening levels. The Japanese Yen has been the best performer of major currencies benefitting from risk aversion within markets, while the USD was generally stronger against most other currencies as the US Fed said they still think gradual rate hikes are appropriate.
Global markets are very concerned on the outlook for China and the impact US tariffs will ultimately have on the economy. Shanghai equity markets were down -3% yesterday, -12% since October, and -23% since May. The Chinese Yuan has continued to devalue which will somewhat soften the blow of tariffs, much to the annoyance of President Trump. In the semi-annual US Treasury currency report, China wasn’t declared a “currency manipulator” although the Treasury Secretary stated that “of particular concern are China’s lack of currency transparency and the recent weakness in its currency”. Focus today will be on Chinese GDP numbers released later this afternoon.
Australia’s unemployment rate is falling faster than anticipated, dropping sharply to 5% last month, down from 5.3% in August, and better than market expectations of 5.3%. The AUD initially made ground on the back of this number before falling back overnight on Chinese economy concerns and the general risk off tone to the market. The NZD/AUD cross rate was initially lower after the employment data before heading back above the 92 cent level overnight with the Kiwi holding firm despite global risk concerns.
GBP has once again lost ground as Brexit negotiations stall. UK PM May is trying to break the stalemate and said she is weighing a plan that would keep the UK bound to European rules for longer. On the other side of the table, the EU says it is ready to extend the proposed length of the post-Brexit transition period.
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