sign up log in
Want to go ad-free? Find out how, here.

NZD back up to the 0.7155 levels based on a slightly weaker USD; GBP down 0.6% on lower UK industrial production; AUD bounces back to 0.7470 after negative GDP figures

Currencies
NZD back up to the 0.7155 levels based on a slightly weaker USD; GBP down 0.6% on lower UK industrial production; AUD bounces back to 0.7470 after negative GDP figures

By Jason Wong

The USD is slightly weaker across the board on a fairly quiet news day. GBP is the worst performer, retreating after its strong run of late. GBP is down 0.6% to around 1.26. UK industrial production fell by 1.3% mom, much weaker than the 0.2% increase expected. After a surprisingly good run of economic data since voting for Brexit, this could be the first signs that growth is likely to shift to a lower gear, as the country faces a long period of uncertainty about its future direction.

The Bank of Canada kept its policy rate unchanged and offered a fairly balanced statement. There was something for everyone in the statement and the CAD has strengthened slightly against the USD. The message seemed to be that Canada would not be following the US move to tighten monetary policy.

NZD traded in a tight range yesterday, before a weaker USD saw it lift a little overnight. It trades up 0.5% to 0.7155. RBNZ Governor Wheeler will release a speech at 9am this morning entitled “Some thoughts on NZ's economic expansion”. At his testimony to a Parliamentary committee yesterday, he noted that NZ per-capita GDP growth was disappointing as was the rate of productivity growth. We would expect him to expand on this theme in his speech today.  The government’s latest economic and fiscal update is released at 1:30pm.  With the looming vote for a new PM, focus will probably be more on the Finance Minister’s delivery than the rosy fiscal accounts.

The AUD has bounced back, following the hit it took after weaker-than-expected GDP data were released yesterday. Negative GDP figures have been a rare event in Australia over recent decades but the general view is that a confluence of factors drove the 0.5% quarterly contraction and a bounce-back will ensue in Q4. After falling by 50pips on the announcement, the AUD has fully recovered and sits around 0.7470. NZD/AUD met resistance at the AUD0.96 level yet again, about the eighth time over the past couple of weeks. It currently sits at 0.9575. Our projections show a flat track around the mid-90s, but the risk is to the upside as NZ's economy performs better than Australia over the coming year.

China's foreign reserves showed their largest monthly drop since January (USD69.1b), falling to an 8-year low of USD3050bn. This takes the cumulative fall over the past 2½ years to almost USD1000bn. The government has been selling down its foreign reserves in order to moderate the significant downward pressure on the Yuan, induced by large capital outflows. Moves this year to add capital controls have stemmed the worst of the flows, but the pressure clearly remains. A weaker CNY adds downside pressure to other Asian currencies and the NZD. Indeed, without this pressure, the ADXY and NZD would likely have been stronger this year.

Get our daily currency email by signing up here:

Email:  

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

BNZ Markets research is available here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.