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Market Update

EncoreFX’s daily market updates are written by our experienced and professional dealing team.

NZDEUR Tests 0.5700 range on Italy’s Government Projected Budget Deficit

Published October 1, 2018

The Kiwi rose against the euro as fears continue the Italian government wants to increase its budget deficit over the coming year, opposed to clamping down and going against both the EU and finance minister wishes.

Italy’s coalition government said in a statement they had agreed to set the budget deficit at 2.4% of GDP, sitting higher than the current level and much higher than Finance Minister Giovanni Tria’s proposed 1.6%. Italian budget concerns together with soft euro inflation have weighed on the Euro and resulted in a sell-off in the currency and stock markets.

NAFTA talks approach deadline

Negotiations for a new North American Free Trade Agreement are at a critical point with the administration of President Trump saying Canada must sign the text of the update by midnight EDT on Sunday (4pm NZT) or face exclusion from the trilateral agreement, which includes Mexico. Trump blames NAFTA for the loss of US manufacturing jobs and wants significant changes to the pact, which underpins USD1.2 trillion in annual trade. Reports indicate there are still a number of sticking points and there is no guarantee an agreement will be made.

Chinese manufacturing activity slows in September

China’s manufacturing sector resulted in a slowdown in September, escalating pressure on policymakers as US tariffs take its toll on the Chinese economy. The manufacturing Purchasing Managers’ Index (PMI) fell more than expected to 50.0 from 50.6 in August and below expectations of 50.5. China’s policymakers have recently shifted its focus to growth-boosting measures to cushion the economy and weather the trade storm by cuttings taxes, reducing financing costs, boost lending to smaller businesses and fast-tracking infrastructure projects. Despite these additional measures, some analysts are predicting things will get worse before they improve.

Week Ahead:

No local data today, with the next focus on tomorrow’s NZ Quarterly Survey of Business Outlook (QSBO) and the latest dairy auctions in the early hours of Wednesday morning.

New South Wales is closed for the Labour Day holiday. Japan’s Tankan manufacturing survey will be watched today.

Tonight: PMI manufacturing releases in the Eurozone and UK and the US ISM manufacturing index.

Tuesday: RBA rate announcement with expectations for rates to remain on hold

Wednesday: US Federal Reserve Chair Jerome Powell speaks at NABE conference in Boston

Friday: Non-farm payrolls