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Kiwi reaches two months high on anticipation of trade agreement

NZD - New Zealand Dollar

The New Zealand dollar advanced higher on Wednesday following the RBNZ decision to keep interest rates on hold at the benchmark rate of 1.5%. Opening the morning at 0.6635, the Kiwi oscillated wildly at the time of announcement seeing a drop to intraday lows of 0.6595. The reason for the initial drop was a more dovish tone set by the RBNZ in their policy statement, noting the likelihood that the next move will be a cut.

Markets are now pricing an 80% chance of an interest rate cut in the next meeting on August 7th in line with G10 central banks who share concerns of lower global growth forecasts for 2019.

The NZD/USD ignored the dovish comments as we saw a rally overnight following comments from US Treasury Steve Mnuchin that a trade agreement between China and the United States is 90% of the way there. Eventual highs reached 0.6692 before settling slightly lower ahead of the release of ANZ Business Confidence figures this morning.

From a technical perspective, the Kiwi currently trading at 0.6681. We continue to expect support to hold on moves approaching 0.6630 while any upward push will likely meet resistance at 67.25 US cents.

Key Movers

Markets slashed bets on the Federal Reserve making multiple rate cuts this year driving the US Dollar higher against the Japanese Yen overnight. President Donald Trump’s position of unnecessary high interest rates at present were starkly juxtaposed with the Federal Reserve as the President has commented on many occasions that rates should be much lower. Market participants scaled back expectations of multiple cuts overnight though as St Louis Fed President James Bullard who is widely considered a dovish banker commented that a half-percentage point drop in July’s meeting would be overdone.

The USD/JPY reached 107.85 overnight as core durable goods orders for the month of May were positive following a poor reading in last month. The news supported initial movements higher for the US Dollar index which finished square for the day at 96.15.

The G20 summit in Osaka, Japan will be a major focus heading into the weekend as the major leaders from around the globe expect trade agreements and tensions in the middle east to be a focal point of discussion.

Expected Ranges

NZD/USD: 0.6620 - 0.6720 ▲

NZD/AUD: 0.9500 - 0.9620 ▲

GBP/NZD: 1.8800 - 1.9200 ▼

NZD/EUR: 0.5840 - 0.5920 ▲

NZD/CAD: 0.8700 - 0.8800 ▲