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Kiwi trades sideways despite escalation in the US-China trade war

NZD - New Zealand Dollar

The New Zealand dollar was whittled lower overnight, falling 0.1% to open at 0.6550. While the movement was negative, it was a relatively good result for the kiwi considering the sharp slump in the Aussie and Chinese Renminbi which the Kiwi tends to follow. Domestically, there wasn’t too much to digest with the kiwi trading on cues from off-shore events.

One Tweet in particular sent global markets into risk-off territory with President Trump calling an early end to the trade ceasefire and announcing he would place 10% tariffs on the remaining $300 billion of Chinese imports as of September 1. Global markets reeled on the news with the safe-haven yen spiking 1.3% and the China proxy Aussie falling 0.6% lower. Amidst this context, the kiwi has been relatively resilient.

The New Zealand dollar closes out the week with little to drive momentum locally. Direction again looks to be driven from the United States with the unemployment rate and Australia’s retail sales set for release. Traders will also be keeping a close eye on developing news from the trade war.

Key Movers

Markets were again moving off comments overnight from President Donald Trump following an additional 10% tariffs on $300 billion in Chinese products due to come into effect next month. The DXY pulled off from 2019 highs as traders moved back into safe haven currencies such as the Japanese yen and Swiss franc. USD/JPY plummeted from 1.0930 to a low this morning of 1.0730 as trade negotiations between United States and China continue to simmer.

The Bank of England kept their official bank rate at 0.75% at this month’s monetary policy meeting overnight. The GBP dropped to a 2 ½ year low of 1.2080 despite barely moving following the release of monetary policy meeting minutes. The central bank cut growth forecasts as ongoing uncertainty of a favourable Brexit continues to weigh on the British economy. Rates are not guaranteed to be cut should there be a no-deal Brexit as the MPC voted 9-0 to keep rates unchanged at 0.75%.

A raft of data including non-farm employment figures & trade balance is due for release this evening in the United States and is likely to dictate direction into the close of trade for the weekend.

Expected Ranges

NZD/USD: 0.6520 - 0.6600 ▲

NZD/AUD: 0.9580 - 0.9700 ▲

GBP/NZD: 1.8300 - 1.8700 ▲

NZD/EUR: 0.5880 - 0.5950 ▼

NZD/CAD: 0.8600 - 0.8700 ▼