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HiFX Morning Update, September 28 2017

HiFX Morning Update, September 28 2017


The NZDUSD opens at 0.7228 (mid-rate) this morning.

The NZD has bounced off the lows against all its rivals, even managing to outperform a rising USD, as investors trim their short NZD positions ahead of this morning’s RBNZ statement.

The USD has continued to strengthen after President Donald Trump and GOP Republicans unveiled a tax reform blueprint which included reducing the number of income tax brackets from seven to three, doubling the size of Americans' standard deductions, and lowering corporate tax. The reforms if passed would lower the maximum tax rate on small businesses, partnerships and limited liability companies to 25%, while corporations would have their federal tax rate reduced from 35% to 20%.

In an effort to attract trillions of dollars companies hold offshore avoiding the current corporate tax rate, the blueprint hopes the introduction of a one-time tax on cash and cash equivalents and a lower rate for liquid assets will see companies repatriate their profits. The blueprint did not elaborate on what the one-time tax rate would be or how long the tax break window would remain open.

Overnight US economic data releases sent mixed messages to the market, with durable goods orders increasing by 1.7% (exp +1.0%) in August following July’s 6.8% fall. US pending home sales fell 2.6% (exp -0.5%) in August following July’s 0.8% fall. The greater than expected fall has the index now sitting at its lowest level since Jan 2016.

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This morning acting RBNZ Gov Grant Spencer is expected to keep rates on hold at the record low of 1.75% with investors looking for any change in the accompanying statement before adding to their positions.

Global equity markets have edged higher - Dow +0.08%, S&P 500 +0.19%, FTSE +0.38%, DAX +0.41%, CAC +0.25%, Nikkei -0.31%, Shanghai +0.05%.

Gold prices are down 1% trading at $1,284 an ounce. WTI Crude Oil prices continue to rise, up 0.4% trading at $52.13 a barrel.

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