Friday morning is probably my favourite part of the whole week. You can't help but wake with a spring in your step knowing the weekend, and that first Friday knock-off drink is within grasp. The Kiwi dollar has awoken with a similar spring this morning, ending the week on a high against the USD off the back of renewed optimism around the trade war and Brexit. So, cheers to the weekend and the fact that today, one New Zealand dollar will get you:
Make sure you don't miss out on improvements like this by adding Rate Move Guarantee to your foreign currency purchase in-store. It's free, and if the rate improves within 14 days of purchase we will refund you the difference!*
This week the New Zealand government posted their most significant fiscal surplus in over ten years, rising by $2 billion to $7.5 billion in the fiscal year ending June 2020. This exceeded the Treasury's forecast by $4 billion.
This news provided some upward pressure to the value of the NZD against the USD. It also means the government has a solid chunk of spending money to inject in the economy and, hopefully, lessen the rate and effects of the current slowdown.
Surplus aside, the NZD's gains as we close the week are supported by weaker US data and positive developments in the US/China trade war.
US-China Trade Talk Progress
This morning Kiwi markets woke to new optimism over the US/China trade deal as negotiations continue in Washington. It seems likely that a partial agreement or 'mini deal' could be reached that will include a 'currency pact' between the two countries as well as a change to the planned tariff increase on $US250 billion worth of Chinese exports to the US.
This news is a stark difference to yesterday's reports that negotiators were making little progress, and Chinese delegates were planning to throw in the towel and leave Washington altogether. I'm not sure what happened overnight to call the drastic turnaround, but quite frankly I don't care because it is great for the New Zealand Dollar.
Yesterday's reports weighed heavily on the value of the NZD, only for it to see upward pressure this morning off the back of the positive news. Should they follow through with the partial agreement, it is excellent news for the Kiwi dollar that will benefit from improved market sentiment due to the reduced downside risk to global growth. In other words, if China and the US start getting along instead of smacking each other with tariffs, the economy has a better chance of avoiding recession.
If you are planning on purchasing USD soon, I highly recommend you keep tabs on these developments as it could have a significant impact on your travel money.
US data disappoints
Another contribution to the upward pressure on the Kiwi dollar is weak USA data released this week. CPI inflation, or inflation on a core basket of goods and services, in particular, rose less than expected.
The weak data makes it all the more likely that the Federal Open Market Committee (FOMC) will cut US interest rates at the end of this month; with markets now pricing a 25 basis point cut at 78%. A cut to interest rates puts downward pressure on the value of the USD and, in turn, upward pressure on the value of the NZD. Remember this is relative, though, and Kiwi interest rates are low in their own right. Either way, it's another element to keep in mind as you prepare to purchase USD.
Brexit deal on the horizon?
While the NZD is up against the USD, it is currently at a three-week low against the pound. Sure this sucks for us, but I think we can give this one to the Poms hoping to escape the never-ending Brexit news cycle.
Why is the pound up, you ask? British PM Boris Johnson and his Irish counterpart, Leo Varadkar, issued a joint statement saying that they "believe a deal is in everybody's best interest" and that "they could see a pathway to a possible deal". This statement came after a three-hour chat between the two leaders. This statement led to a 0.7% jump in the value of the pound against the USD.
Sure this is excellent news; however, no actual information about said deal has been released. If the pound wants to keep riding high, markets are going to need some more clarification. Otherwise, the GBP could very well lose its recent gains.
This is particularly pertinent considering the EU summit next week on October 17, and 18th is viewed as a last chance for the UK and EU to agree on a deal before the October 31 deadline.
Just imagine if they do reach a deal, and the UK leaves the EU on October 31 after all of this time. It's probably not gonna happen. Still, imagining is helping me through the last few work hours of Friday, especially considering we've been dealing with the Brexit saga for over three years.
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