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XE Morning Update - NZ

The NZDUSD opens sharply higher at 0.6660 this morning.

Friday night’s May US payrolls numbers were a big disappointment. The jobs growth number missed estimates by 100,000 (75k versus 175k forecast), wage growth slowed, and average weekly hours worked fell.

The feeble jobs figures came on the heels of soft data on US retail sales, factory output and home purchased and occur against a background of President Trump’s escalating trade war with China. The USD fell sharply across the board, pushing the NZDUSD to a 6-week high of 0.6680, as the markets become increasingly convinced the US Federal Reserve will cut interest rates in the coming months.

The US interest rate markets have fully priced in a 0.25% cut for July and expect the US Fed send out a very dovish message at next interest meeting in 10 days’ time. Additional US rate cuts have been largely priced in for September, which is likely to keep the USD on the back foot.

Fukuoka hosted a G-20 meeting over the weekend. Trade tensions and slowing economic growth dominated talks, with officials warning rising protectionism as being a major threat to the global economy.

In slightly more upbeat news – President Trump reversed plans to impose tariffs on Mexican imports after the two parties managed to reach an agreement on immigration.

The race to be the next UK Prime Minister heated up over the weekend. Front runner Boris Johnson vowed to take the nation out of the EU, with or without a deal. He promised to withhold the GBP 50 billion ‘divorce settlement’ until the UK a more favourable deal. In response, French President Macron said failure to pay the Brexit bill would be equivalent to a sovereign debt default – not all wine and roses there!

There is no data scheduled today in what is a very light week on the domestic economic data front.

Global equity markets were higher on the day on optimism of US Fed rate cut - Dow +1.0%, S&P 500 +1.7%, FTSE +1.0%, DAX +0.8%, CAC +1.6%, Nikkei 0.5%, Shanghai -1.2%.

Gold prices rose 0.1% to USD$1,340 an ounce. WTI Crude Oil prices jumped 1.9% to US$53.99 per barrel.

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