Global Themes

NZD

Fed minutes affirm future hikes

Gradual rate rises remain the favoured path

Minutes from the latest Federal Reserve meeting affirmed that further gradual rate hikes remain the status quo policy. In fact some members expressed concern that an unchecked US economy could lead to a substantial build up in inflationary pressures, which might ultimately be the trigger for a significant economic downturn if allowed to run unhampered. There were concerns raised about tariffs and the effect the recent trade wars are having on capital spending, but overall the statement was very positive, and should remain heavily supportive of the Greenback.

NZD/USD stalled on its rally in the high 0.67s in response to the minutes, and with US interest rates still set to significantly outstrip local returns, it is little wonder international investors continue to prefer USD over NZD on a yield return basis.

US private sector jobs undershoot

177k growth in jobs misses expectations

US private firms increased hiring by 177,000 jobs in June, missing economists’ expectations for a growth of 190k, but still showing a robust US economy. According to some reports hiring slowed from May as firms struggled to find qualified workers in an environment approaching full employment. The non-manufacturing sector continued to grow according to the latest PMI index, with a solid growth in new orders supportive of the Fed’s view that upside risks now prevail for the US economy.

Stock markets responded positively to the slew of US releases overnight, helping the risk sensitive NZD/JPY back towards the 75 handle.

US jobs in focus

Strong growth can be USD supportive

US employment data is the main release tonight, and expectations are for a June increase of 195k jobs. Average hourly earnings are expected to tick up 0.3%.

A strong reading on both could pressure the Kiwi, but if data mirrors the private sector output then importer orders in the 0.68s could come into play.

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