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James Hyerczyk

The Australian and New Zealand Dollars are trading higher on Wednesday as investors continue to express optimism that the trade conflict between the United States and China would end sooner-than-previously expected. Furthermore, Aussie and Kiwi traders appear to be little shaken by the latest round of tariffs announced by the United States and China on Monday and Tuesday, respectively.

At 0719 GMT, the AUD/USD is trading .7265, up 0.0040 or +0.57% and the NZD/USD is at .6615, up 0.0033 or +0.50%.

The reaction by Australian and New Zealand Dollar traders seems to suggest that the tariff announcement was overall on the soft side of market expectations.

On Monday, President Donald Trump levied tariffs on $200 billion worth of Chinese goods. But the new duties were set at 10 percent for now, before rising to 25 percent by the end of 2018, rather than an outright 25 percent, that some investors had priced into the market.

Yesterday, China retaliated with duties on about $60 billion worth of U.S. goods. Some traders thought China would go after the supply chain and place restrictions on exports on minerals and small components for U.S. electrical devices.

In economic news, Australia’s MI Leading Index rose 0.1%, up from 0.0%. Christopher Kent, RBA assistant governor, gave a speech on “Money Creation” at the Reserve Bank’s Topical Talks Event for Educators.

The Aussie picked up some strength following a speech by Governor Kent which highlighted a lack of concern over the rise in household and consumer debt, putting pressure on the banking system. He stated “we should not be concerned about the banking system facing a deposit funding gap”.

In New Zealand, Westpac Consumer Sentiment fell to 103.5, down from 108.6. The Current Account rose to -1.62B, up from 0.09B. Traders were looking for -1.23B.

New Zealand consumer confidence dropped to a six-year low of 103.5 in the third quarter, according to the Westpac McDermott Miller Consumer Confidence survey. That was down from 108.6 in the previous quarter.

The report showed that the drop in confidence was most acute in Auckland, where Westpac economists said the slowdown in the housing market and rising fuel prices were likely hitting households.

New Zealand’s current account deficit for the year ended June 2018 widened to $9.5 billion or 3.3 percent of GDP, Stats NZ said early Wednesday.

The deficit is $2.4 billion wider than the year ended June 2017 deficit and is the largest since the year ended June 2009. A $2.1 billion increase in the primary income deficit was the main contributor.

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