After a mid-week decline, the Kiwi dollar has been able to recover slightly as we close out the week. Global factors continue to have a significant impact on the value of the NZD and, with the weekend’s respite in sight, one NZD will buy you:
If you need some foreign currency, be sure to add Rate Move Guarantee to your purchase in-store. It’s free, and if the rate improves within 14 days of purchase we will refund you the difference!*
This week limited domestic data was influencing the NZD. Instead, it absorbed the ebbs and flows of a global economy dictated by the US and China trade relations, US and Australian data and Brexit.
In particular, weakness in USD helped push the NZD off multi-year lows. The Kiwi dollar could also potentially see an impact from Australia’s housing and retail sales data that will be released later today. As Australia is New Zealand’s biggest trade partner, shifts in the AUD has a substantial impact on the value of the NZD.
While the NZD has seen a last-minute uplift, the USD has declined for the third day in a row off the back of weak data.
The key data point was the non-manufacturing ISM, which surveys the broader services section of the economy. This fell below market expectations to 52.6 and is the lowest level seen since 2016.
Today (US time) will also see the September non-farm payrolls report released. Markets expect to see that US employment has expanded by 140,000 jobs. Should this not be the case, there is an increasing chance that the Federal Open Market Committee (FOMC) will cut US interest rates.
While a cut to US interest rates is generally good news for the Kiwi dollar, the weakening of the US economy is not promising. The global economy as a whole is not doing too crash hot at the moment so, foreign currency aside, we generally want all countries to see improvements in their data to avoid the prospect of another recession.
On Wednesday British Prime Minister Boris Johnson submitted his latest Brexit proposal to the European Union. The most significant point of change and contention is the Irish border. Johnson plans to create both a customs and a regulatory border between Northern Ireland and Great Britain, going against Theresa May’s promise to avoid physical border checks.
There have already been several responses to Johnson’s latest proposal, most of which aren’t glowing reviews. European Commission President Jean-Claude Juncker said the plan “has numerous problematic points”. European Union Council President, Donald Tusk, said he is “still unconvinced” about the new Brexit proposal. Further, members of the European Parliament, a.k.a those who will ultimately approve the deal, noted: “The UK’s proposal falls short and represents a significant movement away from joint comments and objectives”. Sheesh.
Initial comments aside, the EU will continue to work with the UK over a deal. Should they not reach common ground and approve an agreement by October 19, Johson is required by UK law to request an extension. However, Johnson has made it very clear that Brexit will happen on October 31 with or without a deal.
As always, the pound continues to be impacted by changes in confidence around Brexit. As we dive into October with less than 30 days until the deadline, there is no doubt we will see some turbulence in its value in the coming weeks.
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