Expectations for US rate cut help Kiwi move clear of 12 month lows

Key Movers

The Great British pound touched five-week lows against the Euro through trade on Thursday as trade talks stalled and fiscal spending expectations faltered. Britain maintained a hardline stance in negotiations with EU trade officials pushing for binding access to the EU’s financial market. London, as the financial hub of Europe is dependent on access to the EU as its biggest market for key banking and financial services. Failure to secure a favourable trade agreement could have an immeasurable impact on the UK's financial centre. Slipping back below 1.2860 we expect sterling will remain range bound around the 1.30 handle with larger swings as GBP volatility increases. The US dollar tracked lower through trade on Thursday as market priced in an increased likelihood the Fed will cut interest rates before May. Futures markets have now fully priced in a quarter point rate cut in April with a full percentage point reduction pushed through by March 2021. The dollar index fell to three-week lows moving through 98.40 as investors reposition and unwind recent short term carry trade positions and correct US economic expectations in the face of the spreading coronavirus.