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US Fed Leaves Rates Unchanged | NZD Touches 3 Month High

Published December 12, 2019

The Kiwi Dollar opens higher today reaching a 3 month high this morning as the US Fed left interest rates unchanged as expected. Both the NZD and AUD were amongst the best performing currencies overnight making ground during European trading and continuing on this morning after the Fed announcement. This is despite U.S China trade negotiations continuing to create market uncertainty and weighing on risk appetite.

Fed Holds Rates As Expected

The US Fed has kept interest rates unchanged as widely expected and indicated that no action is likely next year amid persistently low inflation. While there were no surprises announced it did note that while the economy is growing modestly at present, “business fixed investment and exports remain weak”, with officials continuing to monitor conditions as they develop. Earlier in the day US CPI data came in slightly better than expected, but the reaction was muted as the market awaited the FOMC decision.

Trade War Uncertainty Continues

Reports suggest that China sees the cancellation of the scheduled December 15th tariffs as a minimum pre-condition for continuing negotiations on a trade deal with the US. The Trump Administration has kept everyone guessing as to whether they will move forward with the next round of tariffs, a move that would almost certainly sour negotiations and derail hopes of a Phase One deal anytime soon.

The Day Ahead

With the FOMC meeting out of the way, attention will now turn to tonight’s ECB rate decision, which is the first monetary policy meeting under new President Lagarde. No change to policy is expected however any changes to economic outlook language will be closely analysed.