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Sterling Outperforms As Conservatives Lead in Polls

Published November 19, 2019

The NZD edges higher against the USD and AUD as markets await key central bank minutes from Australia today and the US on Thursday.

US-China Trade Pessimism

China grows pessimistic about a trade deal due to Trump continuing to insist publicly that he has not agreed to scrap some tariffs. Markets however welcomed news that the US has granted a 90-day extension for US companies to do business with Huawei despite the mixed signals on US-China trade relations.

Further in China, global stocks rose yesterday as China surprisingly cut a key interbank lending rate for the first time in more than four years, a signal to markets that China are ready to act to prop up slowing growth and ease investor’s worries. Markets now expect a cut in China’s prime loan rate when the PBOC meet in a few weeks.

Pound Boosted on Election Hopes

The pound is the top performing currency overnight as polls indicated a solid lead for the Conservatives ahead of the December 12th elections. The currency was further supported by comments from UK Prime Minister Boris Johnson saying that all Tory candidates in the election have pledged to back his Brexit deal, which suggests better chances of getting the agreement through parliament with a majority win. Johnson was also reported saying “I am offering a pact with the people: if you vote Conservative you can be 100% sure a majority Conservative government will unblock Parliament and get Brexit done.” With 24 days remaining to vote, there is still plenty of time for new scandals to swing votes and the next test will be when candidates take part in the first televised election debate tomorrow.

Markets Await RBA Meeting Minutes

The Reserve Bank of Australia will release the latest minutes of its last monetary policy this afternoon, where they held interest rates on 5th November at the record low 0.75%. The RBA signaled a pause to their rate cutting cycle and markets are currently only pricing in a 21% chance of a rate cut when they next meet on 3rd December.  The release is not expected to be market moving.

NZ Dairy Auctions tonight with a further lift in milk prices expected.