It might already be January 10, but this is the first NZD update of 2020 so Happy New Year! 2020 has hit the ground running, with Australia battling unprecedented fires, growing tensions between US and Iran and Brexit news dominating media in the first ten days. The NZD steadily saw gains against the USD in the last few days of 2019, before seeing somewhat significant drops as we started the new year. This decreasing trend continues with no short term relief expected.
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What’s impacting the NZD this week?
In the USA
It's been a big few weeks for the USA. Trump's impeachment proceedings began, and tensions rose after the US attack on Iranian General Qassem Soleimani and retaliation attacks from Iran on US forces in Iraq.
Despite the magnitude of these events as global news, they have done very little to depreciate the value of the USD. It seems markets are used to the happenings of the Middle East and aren't as shaken as we otherwise would have thought.
While these events haven't budged the value of the USD, they have at least slightly dampened market risk appetite. Today's development of potential de-escalation from Trump will help this further.
Major events aside, tonight will see the release of the November non-farms payroll data. Markets expect 160,000 increase in payrolls; their hopes bolstered by gains in ADP employment and lower than expected US jobless claims data. Should the non-farm payroll data be as strong as expected, it is likely to provide further support to the value of the USD and delay an interest rate cut by the US Federal Open Market Committee for now. Markets still expect at least two interest rate cuts in 2020.
Long story short: the USD is doing pretty well and is expected to continue this trend, at least for the time being.
In the UK
Harry and Meaghan have stepped down from Royal duties. This caused a huge fuss in the media, but financial markets don't care at all. What they do care about, however, is Brexit which saw a significant step forward this week when MP's supported Boris Johnson's legislation 330 votes to 231. After what seemed like countless attempts in 2019 to reach this point, the GBP was understandably boosted as a result of the bill being passed.
Shout out to the December election for giving his party a majority to get something done. Who knows if it was the right decision, but at least something is happening and we are slowly progressing out of the limbo we were stuck in for all of 2019.
The legislation now heads to the House of Lords next week where it will be scrutinised further. It is expected to pass through this and further stages pretty swiftly and receive Royal Assent (aka the Queens A-OK) by January 31. The current Brexit deadline is March 31, though swift proceedings (and Boris' best efforts) mean an end of January departure is likely.
While this is positive news for the current value of the pound, markets expect GBP appreciation to be limited due to uncertainty around how the UK-EU trade negotiations will unfold over 2020.
In New Zealand
The domestic economy saw positive growth signs as we closed out 2019; however, the effect of these on the NZD has been outweighed by wider global happening. With that in mind, while the Kiwi dollar has depreciated against the USD, we have seen gains against the AUD.
Looking forward to next week, the NZD will continue to be driven by global movements and their effect on market risk-sentiment as there are limited Kiwi data releases scheduled that will have an impact.
All things considered, if you're planning an overseas adventure in 2020, it is worth keeping an eye on the NZD and purchasing when it is doing well against your preferred currency. Sign up for rate alerts, and don't forget to take advantage of the Best Price Guarantee at your local Travel Money NZ.
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