XE Morning Update - May 17, 2019

NZDUSD 0.6535 -0.4%
NZDEUR 0.5851 -0.1%
NZDGBP 0.5109 0.1%
NZDJPY 71.78 -0.1%
NZDAUD 0.9483 0.1%
NZDCAD 0.8800 -0.2%
GBPNZD 1.9573 -0.1%

The NZD and AUD both struggled overnight as markets remained concerned about the increase in trade tensions between the USA and China. Trumps move to raise tariffs from 10% to 25% has made markets nervous. Overnight comments in the Chinese media indicate China will fight back with a range of measures including raising tariffs on USD 60 billion of products imported from the USA. China has also begun reducing its holdings of US treasury Bonds as a way of pressuring the US. The big question for currency markets is what will China do with it’s massive US Dollar holdings. China has over USD 3.0 Trillion of foreign currency reserves, mainly held in US Dollars. Any move by China to diversify away from the USD would send shock waves through the currency markets. China has historically limited the conversion of USD back into CNY and it has weakened the CNY 3.0% in the last week in the wake of Trump’s increased tariffs.

Looking at the markets the NZDUSD rate is drifting down towards the low 0.6500 area, last seen in October last year. The Aussie Dollar also remains under pressure feeling the brunt of the trade war concerns. The Australian General Election is being held tomorrow with the passing away of former Labour leader Bob Hawke potentially pushing Labour over the finish line in the close fought race. Commentators have speculated that a Labour win will see a similar result to NZ, with business confidence sliding but economic growth holding up well as higher Government spending supports growth.

Global equity continue to push higher, - Dow +0.68%, S&P 500 +0.80%, FTSE +0.76%, DAX +0.90%, CAC +0.62%, Nikkei +0.58%, Shanghai +1.91%.

Gold prices have edged lower, down 0.2% trading at $1,295 an ounce. WTI Crude Oil prices continue to push higher, up 1.0% Trading at $62.30 a barrel.

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