Kiwi bulls took the lead early on and never looked back on counter currency weakness and comments from RBNZ Governor Orr, signaling that unconventional monetary policy tools are off the table for now.
New Zealand Headlines and Economic data
No major headlines from New Zealand to lift the Kiwi higher on Monday and Tuesday, so it’s highly likely counter currency weakness (EUR & GBP hurt by Brexit developments, CAD dragged lower by weaker oil prices, USD weaker on negative U.S. geopolitical news, etc.) was the influence that broadly saw the Kiwi rise in value early week.
- New Zealand trade balance was a deficit of $1.6B in August 2019
- New Zealand central bank stands pat, flags scope for more stimulus – the RBNZ held the OCR at 1.00% as expected after the surprise cut of 50 bps at the last meeting. Overall, the statement wasn’t as dovish as expected, but they did keep the door open for more monetary and fiscal stimulus, which was likely the main driver for the weakness in NZD after the initial spike higher.
- Fonterra posts $605m net loss in annual results
- RBNZ Governor says unlikely to need unconventional monetary policy tools – this greatly reduced the odds that the RBNZ may use the same extreme monetary policies like quantitative easing and negative interest employed by other major central banks, and keep its interest rate advantage against most of the major currencies.
- Another pop higher higher for the Kiwi during the Thursday U.S. trading session, arguably on a positive turn in the U.S.-China trade war story (China says in close communication with U.S. over October trade talks)
- The Kiwi took a step back mid-U.S. trading session on Friday, likely on news that the White House deliberated blocking on all US investments in China. This is a pretty big deal that likely increased speculation that the U.S.-China trade deal gets a lot harder to get done, thus extending the uncertainty that looms over global economic growth and the markets.