New Zealand Dollar Finds Support as Odds of RBNZ Rate Cut Decline

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  • Trade Tensions Fail to Weigh Down Australian Dollar – US Dollar slump benefits AUD exchange rates
  • Unexpected Retail Sales Growth Supports Sterling – Pound shakes off latest Brexit worries
  • US Dollar Falls Further Out of Favour – Improved business outlook unable to prevent USD decline
  • Odds of RBNZ Rate Cut Diminish After Strong Second Quarter Growth – Positive GDP data shores up New Zealand Dollar

Australian Dollar Continues to Shrug Off Trade Tensions

As trade tensions between the US and China continued to simmer yesterday the Australian Dollar saw a day of mixed trading. As Chinese officials accused the US of being insincere in its approach to trade - by imposing fresh tariffs even as it calls for another round of talks - the two sides remain at odds. However, with China ruling out the prospect of weaponising its currency market risk appetite persisted. The latest dip in the US Dollar overnight offered additional support to AUD exchange rates.

The strength of the Australian Dollar remains tied to wider market trends today as fresh domestic data remains lacking.

Surprise Retail Sales Growth Boosts Pound

Contrary to expectations, UK retail sales saw fresh acceleration on the month in August, defying forecasts of a -0.3% contraction. Even in the face of rising inflation and weakening wage growth UK consumers continued to spend, fuelled by credit. This boosted hopes for more robust third quarter growth, in spite of persistent uncertainty over Brexit. Although tensions between UK and EU officials failed to ease overnight, with EU leaders ruling out the prospect of any bilateral engagement with Theresa May, this was not enough to dampen the mood of the Pound.

A fresh increase in UK public borrowing on the month could put GBP exchange rates under renewed pressure this evening.

Weak Consumer Confidence Limits Euro Upside

A surprisingly sharp decline in the Eurozone consumer confidence index did little to support EUR exchange rates overnight. The index’s decline from -1.9 to -2.9 indicates that sentiment within the currency union is continuing to deteriorate in the shadow of global trade worries. This weaker showing does not bode overly well for the wider economic outlook. Even so, the Euro was able to hold onto a stronger footing against many of the majors thanks to the latest slump in the US Dollar.

If the Eurozone’s manufacturing and services PMIs show steady growth on the month in September this could see the single currency extending its gains further.

US Dollar Slumps in Spite of Improving Business Outlook

Although the Philadelphia Fed business outlook index bettered forecast, rising from 11.9 to 22.9 on the month, the mood towards the US Dollar soured overnight. As investors piled out of US Treasury bonds this placed USD exchange rates under significant pressure, prompting a sharp decline across the board. Fresh signs of weakness within the US housing market added to the bearishness of the US Dollar, meanwhile, as confidence in the outlook of the domestic economy declined.

Unless tonight’s US manufacturing and services PMIs show solid improvement on the month USD exchange rates may struggle to regain their footing.

Canadian Dollar Under Pressure After Trump Attacks Oil Prices

Oil prices fell back on Thursday after Trump launched a verbal attack on the Organisation of the Petroleum Exporting Countries (OPEC), referring to the group as a ‘monopoly’ and criticising rising prices. The intervention drove Brent crude away from the psychologically important US$80 per barrel mark, dragging the commodity-correlated Canadian Dollar down in tandem. Signs of modest Canadian jobs growth failed to give CAD exchange rates any real support, meanwhile.

Further weakness could be in store for the Canadian Dollar tonight, with forecasts pointing towards an easing in August’s consumer price index data.

Strong Second Quarter Growth Shores up New Zealand Dollar

The odds of the Reserve Bank of New Zealand (RBNZ) cutting interest rates in the near future diminished sharply in the wake of the second quarter gross domestic product data. Investors were encouraged by a strong surge in quarterly growth, which accelerated from 0.5% to 1.0%. This gave the New Zealand Dollar a solid boost against many of the majors.

Signs of a fresh uptick in New Zealand credit card spending could give NZD exchange rates an additional leg up heading into the weekend.

Data Released

September 21st 13:00 NZD Credit Card Spending (YoY) (AUG) 
September 21st 18:00 EUR Eurozone Manufacturing PMI (SEP) 54.5
September 21st 18:00 EUR Eurozone Services PMI (SEP) 54.5
September 21st 18:30 GBP Public Sector Net Borrowing (AUG) 2.9 billion
September 21st 22:30 CAD Consumer Price Index (YoY) (AUG) 2.8%
September 21st 23:45 USD Manufacturing PMI (SEP) 55.0

Post by TorFX

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