XE Morning Update - October 17, 2019

NZDUSD 0.6285 0.0%
NZDEUR 0.5674 -0.2%
NZDGBP 0.4895 -0.8%
NZDJPY 68.35 0.1%
NZDAUD 0.9306 0.1%
NZDCAD 0.8290 -0.1%
GBPNZD 2.0410 0.8%

The NZDUSD opens at 0.6285 this morning.

The US Dollar fell across the board overnight after a surprise drop in US Retail Sales in September. Sales fell -0.3% vs an expected +0.3% increase. The drop raises questions about the strength of the US consumer market which has been the main bright spot in the US economy. If the consumer sector is slowing then the US Fed will end up cutting interest rates further which will reduce demand for US dollars. The Fed meet in two weeks’ time and a further rate cut is now extremely likely.

In the UK a Brexit deal looks close to being finalised which saw the Pound recover more ground. Speculators who had bet against a deal are being forced to buy back their Pound bets and this is leading to a surge in the Pound. This has pushed the NZDGBP and AUDGBP rates down to one year lows and proving very attractive for those people wanting to convert their Pounds into either NZD or AUD.

Yesterday in NZ third quarter CPI inflation came in stronger than expected at + 0.7% for the quarter and +1.5% for the year. This was well above the RBNZ's expected range and could see the RBNZ hold off on further interest rate cuts when they next meet in November.

In Australia today, the main focus will be on the latest Labour market data which is expected to show a further small increase in jobs, circa +10k and a steady unemployment rate at 5.3%. The RBA have cut rates three times this year citing unemployment as their main focus so the markets are paying increased attention to the monthly jobs data.

On the trade war front US President Trump said they are making good progress on documenting the weekend's phase one trade deal. So far the markets have been reluctant to price in the good news from the weekend's deal with the NZD and AUD bearing the brunt of ongoing negativity re the trade deal. Both currencies continue to look undervalued from a longer term perspective.

Global equity markets were higher on the day - Dow +1.0%, S&P 500 -0.2%, FTSE -0.6%, DAX +0.32%, CAC +1.1%, Nikkei +1.2%, Shanghai -0.4%.

Gold prices rose 0.7% to USD$1,493 an ounce. WTI Crude Oil prices up 0.3% to US$53.25 per barrel.

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