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NZD Falls As Trade Tensions Weigh on Markets

Published February 28, 2019

The NZD opens lower this morning as geopolitical concerns return to markets as India-Pakistan tensions mount after Pakistan said it shot down two Indian aircraft. Trade tensions also returned to markets following President Donald Trump’s lead US trade negotiator’s comments to US Congress.

US – China Trade Talks: Heavy Work Needed to Reach Deal

US trade representative Lighthizer told Congress on Wednesday that the issues between the US and China are “too serious” to be resolved by promises to purchase more US goods and would need to include “significant structural changes” around the protection of intellectual property rights before the two countries strike a permanent trade deal. These are the first public comments from the US’s top trade negotiator since President Trump said earlier in the week he would delay a self-imposed 1st March deadline to raise tariffs on USD200 billion worth of Chinese goods from 10% – 20%. Markets reacted negatively to the comments and sold off commodity currencies with both the NZD and AUD opening 0.7% lower against the USD this morning.

Pound Continues Gains as No-Deal Brexit Fears Fade

British lawmakers have the opportunity to vote on up to five proposed changes to PM Theresa May’s Brexit plans today. Proposed changes include to rule out leaving the EU without a deal and one which seeks to put into law May’s promise that by 14 March parliament will have a chance to either back her deal, a no-deal exit, or a delay to Brexit. The Pound continued to rally higher as expectations on a no-deal Brexit fall.

In the US: Fed Resumes Day 2 in Congress

US Fed Chair Jerome Powell continued his two-day testimony before the US Congress and said the Fed will stop shrinking its USD4 trillion balance sheet later this year, adding that doing so would leave the balance sheet at about 16-17% of GDP, up from about 6% before the financial crisis. How the Fed plan to manage this is yet to be decided with Powell commenting the Fed still have a bunch of decisions ahead of it.

Locally we have the ANZ consumer confidence report at 1pm, followed by Chinese Manufacturing at 2pm and US GDP tonight.