US funding shenanigans weigh on greenback. Apple to make massive repatriation. Other US data mixed. China data positive. NZD holds its own

By Jason Wong

Focus is currently on Washington where a US government shutdown deadline looms this weekend unless a stopgap funding bill is agreed.  The USD remains under pressure as a result, while the US 10-year rate pushed through 2.60% for the first time since March.

Since yesterday’s daily, there has been a swing in the USD, falling as reports came through that a stopgap funding bill didn’t have enough votes, then rising following news that Apple would pay a one-time tax of $38bn on its overseas cash holdings and invest $30bn in capital spending in the US over five years that would create more than 20,000 jobs.  While some focused on the positive USD effect of US companies repatriating funds, an arguably better explanation is the feel-good factor if other companies make similar decisions.  Make America great again? Following this, there was more conflicting news on whether or not a government shutdown in the US might be averted.  We still await a vote on a stop-gap spending bill, with a tweet by Trump last night adding to the difficulty in getting agreement. 

With all this going on, economic data have taken a backseat.  US data were mixed, but dismissed by the market fairly readily due to their inherent volatility – a plunge in jobless claims following their recent upward spike; and ditto for housing starts, while permits were in line.  A slightly weaker Philly Fed survey might be explained by harsh weather.  On a more positive note, China data confirmed that growth was solid, with full-year GDP rising by 6.9%, its first increase since 2010.  Retail sales growth was weaker than expected but all the other key indicators were slightly stronger. 

Soon after we went to print yesterday, NZD/USD shot up to 0.7331 and that proved to be the high for the day, with the Apple news seeing that move quickly reversed.  After regaining its poise we saw the NZD get dragged down alongside a weaker AUD, as the market focused on the higher than expected Australian unemployment rate than the better jobs figure.  From a low of 0.7245, the lack of any positive news on the threat of a US government shutdown has since seen broadly based weakness in the USD and the NZD push back up through the 0.73 mark. We’ve been down this road many times before, with noise about the US government shutting down and possibility of defaulting on an interest payment, but the end result has always been a kicking of the can down the road and no default event.

The NZD has slightly outperformed, making it higher on the crosses, but not significantly so.  NZD/AUD is slightly higher at 0.9140, even as AUD/USD has pushed back up to the 0.80 mark.  Broadly-based USD weakness sees EUR/USD up to 1.2225, GBP up through 1.39 (but since retreating) and USD/JPY trading just below 111.

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