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USD Falls As Chance of Fed Rate Cut Increases

Published July 4, 2019

The Kiwi opens higher as chances of a rate cut from the Federal Reserve increase following a raft of weak data released from the US overnight. US stocks surged in thin trading ahead of the US Independence Day holiday.

USD Falls on Series of Weak Data

  • The USD fell after US private sector employment increased by 102,000 jobs in June, missing forecasts of 140,000, according to the ADP National Employment Report. Focus now turns to Friday’s US jobs report with non-farm payrolls forecasted to rise 164,000 in June, rebounding from the 75,000 gain in new jobs in May.
  • The ISM services PMI recorded its lowest reading in 2 years, falling to 55.1 in June from 56.9 in May, indicating a sharp slowdown in economic growth.
  • In other data, the US trade deficit rose 8.4% to USD55.5 billion in May vs forecasts of the trade gap widening by USD54 billion. Trade tensions between the US and China show the US is going backwards. Markets are now largely pricing in a rate cut when the Federal Reserve next meet on 31st July by 25 points and have priced close to a 30% chance that they will cut by 50 points.

Australia May Trade Balance

Australia’s trade balance posted a record surplus in May for both goods and services at +AUD5.745 million vs previous record of +AUD4.871 million. This was largely driven on the back of strong iron ore prices which jumped 13.4%.

Australian Retail Sales released at 1.30pm today with an increase in 0.2% in May sales expected