One minute the trade war is progressing well, the next markets are downcast about the prospects of a resolution. Foreign currency responds appropriately, which means the NZD has recently been riding a very tumultuous wave as sentiment around the trade war continues to change. This week there was less positive news which, in turn, put downward pressure on the value of the Kiwi Dollar. With this in mind, today one NZD will buy you:
If you're planning on exchanging your NZD to foreign currency for an upcoming trip, we recommend adding 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*.
Trade Talks between the US and China resume
Trade deputies from the US and China have begun two days of talks. While it is undoubtedly positive that they are talking, White House Economic Advisor Larry Kudlow said there was "little softening" in the mood. Hmph.
Further, President Trump's advisor on China strategy, Michael Pillsbury, said that Trump could quickly increase tariffs and escalate the trade war if he wanted. Thanks captain obvious. It's not like Trump hasn't been doing that for the last year.
Summary: The US and China are chatting, but we have no idea if anything will improve ¯\_(ツ)_/¯
In other US related news, the US Federal Reserve Bank cut interest rates by 0.25% this week. Fed Chair, Jerome Powell, sited the cut (which is the second this year) was a move to stimulate the economy as trade war fears continue to swell. The cut did not have a significant effect on the value of the USD against the Kiwi dollar.
New Zealand GDP data not enough to ward off another interest rate cut
Yesterday New Zealand's Q2 GDP growth was released, slightly beating market expectations of 0.4%, coming in with a 0.5% increase on last quarter and 2.1% on last year. This has reinforced the markets view that the Reserve Bank of New Zealand is highly likely to cut interest rates this year.
This comes amidst slowing business confidence and signs that consumers are saving their pennies instead of throwing cash around. The mindset is probably spurred by a weaker global economic outlook that is mirroring onto New Zealand's own economic prospects.
While a decrease in interest rates could potentially assist the NZ economy, it isn't great news for the Kiwi Dollar. Investors will move elsewhere seeking a higher return which will, in turn, put downward pressure on the value of the NZD.
A 50-50 chance of a Brexit deal by October 31
The GBP was boosted slightly this week by the news that European Commission President, Jean-Claude Juncker, said that a Brexit agreement could be reached by October 31. That is providing the Irish backstop was replaced by something that still achieves the same objectives of the backstop. Markets clung to this hope, and the pound experienced upward pressure as a result. It is important to note, though, that Juncker also said he didn't currently see the odds of the deal at more than 50-50.
In other UK news, overnight the Supreme Court ruling into the legality of PM Johnson's decision to suspend parliament concluded. The verdict is expected next week. Should Johnson's decision be deemed legal, the suspension will continue until October 14. However, if it is considered illegal, there will be enormous pressure for Johnson to resign. If he stands down, opposition parties will have the option to appoint a caretaker PM charger with delaying Brexit and calling a general election.
Sigh. For an incredibly dry topic, there really hasn't been a dull moment lately.
Saudi Arabia continues to point the finger at Iran
Following the drone attacks on Saudi Arabian oil facilities last Saturday, both the US and Saudi officials have concluded that the attacks were "unquestionably sponsored by Iran".
Moreover, Saudi officials are also pretty cautious about escalating tensions with Iran and potentially triggering a war. This is especially the case after Iran Foreign Minister, Javad Zarif, warned of the prospect of "all-out war" should the US or its allies launch military action against Iran in response to the oil attacks.
Tensions between Iran and Saudi Arabia are already quite strong, so fingers crossed this can be resolved without an all-out war that could have dire consequences for the world's oil and energy supply.
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