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XE Morning Update

The NZDUSD opens at 0.6640 (mid-rate) this morning.

The Australian Dollar has been the strongest performer in the currency markets overnight. The USA and China are expected to sign phase 1 of their trade deal on Wednesday night and this should take some of the downward pressure off the Aussie Dollar. Over the past 18 months the Aussie has acted as a proxy for uncertainty about the trade war and with it now drawing to a close there is scope for the AUD to outperform. Also helping the Aussie outlook has been more upbeat economic data with last Friday's retail sales rising the most in 18 months.

The Chinese Yuan is also appreciating as the phase 1 deal is completed. The Chinese have let the Yuan weaken over the last 18 months to offset the effects of Trump's tariffs. This has meant that American consumers carried nearly all of the cost of the Tariffs. But with the deal set to be signed, the CNY is appreciating which bodes well for both Australian and NZ exports to China.

The Pound was the weakest currency overnight as the market starts to price in the likelihood of an interest rate cut for the UK. Traditionally the UK has used a weaker Pound as a means of supporting the economy and it looks like this will again be the case as they go through with their Brexit plans.

Today we get an update on the latest China trade data, although this will be less relevant given the trade deal and then tonight we get the latest print of US Consumer price inflation.

Global equity markets are mostly higher, - Dow +0.18%, S&P 500 +0.50%, FTSE +0.39%, DAX -0.24%, CAC -0.02%, Nikkei +0.47%, Shanghai +0.75%.

Gold prices are down 0.6% - trading at at $1,550.80, while WTI Crude Oil is also lower, trading at $58.22 a barrel.

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