- NZD/USD tucked in below fresh monthly highs on trade-deal optimism.
- RBNZ focus on slowing economy, which will see inflation continue to fall short over the next year.
NZD/USD printed fresh monthly highs at the start of this week to 0.6416 before sliding to lose the handle and scoring a low of 0.6370. The pair was supported there in the US session and is trading some 0.25% higher at the time of writing at 0.6399.
There has been an air of optimism in the financial and commodity markets as traders look to geopolitical headlines for cues on an otherwise quiet data calendar.
The focus has centred around US-China trade and Brexit negotiations and positive headlines have created a risk-on setting for which the antipodes derive their fuel from and what tends to weaken the US Dollar.
USD/CNH has been on the back foot as a result of the trade talk traction between the US and China and today’s bullish message from the US administration is that things are moving along towards a deal being signed as soon as next month, possibly at the Chile APEC summit, so long as it is not cancelled due to the deadly protesting – Protests against a metro fare hike began last Monday, and events since then have accelerated at an alarming speed – Seven people had died as of this weekend. If the government takes measures to resolve the situation, then it could have a chance to save the summit, but it is the military that has been given powers to do so and it seems to be escalating the riots, not resolving matters.
Meanwhile, with a focus on the Reserve Bank of New Zealand, (RBNZ), markets were taking note of late of the inflation data where the Consumer Price Index moved further below 2% in Quarter 3, falling to 1.5% year on year. However, the central bank will also consider the surprise rise in domestic (non-tradable) inflation to 3.2% as a bonus – “RBNZ’s focus will remain on the slowing economy, which will see inflation continue to fall short over the next year. To support the inflation outlook, we’re expecting cuts in November, February, and May, taking the OCR down to 0.25%,” analysts at ANZ Bank argued. Meanwhile, “market pricing for RBNZ is for 24bp of easing on 13 November, with a terminal rate of 0.57%,” analysts at Westpac explained.