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U.S Moves Ahead With Tariffs, Dairy Prices Fall Again

Published September 19, 2018

The Kiwi Dollar starts the day at similar levels to yesterday as the market largely shrugged off news that the Trump administration were pushing ahead with further tariffs on $200b of Chinese imports. The tariff rate will initially be set at 10%, but increasing to 25% at the start of next year. China has announced they will retaliate with their own tariffs on $60b of US imports. The big question for markets now is whether there will be further escalation or any scope for negotiations to resume. President Trump has tweeted that “there will be great and fast economic retaliation against China if our farmers and/or industrial workers are targeted”. There is a remaining $267b worth of imports that Trump could target, which would then cover all US imports of Chinese goods.

NZD Steady as Risk-On Tone Returns to Market

The NZD, AUD, and CAD all performed relatively well overnight with a risk-on tone returning to the market. The Kiwi was able to remain firm despite Dairy Prices falling once again in the overnight GDT auction. Prices were down 1.3% in USD terms, or 1.75% in NZD terms. It is now eight consecutive auctions where prices have fallen, which has added up to a -19% fall over that time. The fall in NZD has been less harsh, at -10%, due to the declining Kiwi Dollar.
The NZD/AUD cross rate is lower this morning as the Aussie outperformed the Kiwi. The Aussie found some temporary support after the Reserve Bank of Australia said the next move in their interest rate is likely to be up, however this would not happen in the near term.
The next big announcement for the NZD is tomorrow’s Q2 GDP data, due at 10.45am.