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Bob Mason
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Earlier in the Day:

Economic data released through the Asian session this morning was limited to August trade and September business confidence numbers out of New Zealand.

For the Kiwi Dollar,

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The August trade deficit widened from a revised NZ$4,500m to $4,810m in August, year-on-year, and from a revised NZ$196m deficit to a NZ$1,484m deficit, month-on-month, which was far worse than a forecasted widening to a NZ$930m deficit and the largest ever monthly goods trade deficit. According to NZ Stats:

  • The month-on-month rise in imports to near record levels occurred at a time when exports are traditionally at their lowest.
  • Imports increased by NZ$675m (14%) compared with August of last year, to hit NZ$5.5bn, the 3rd highest on record, while exports rose by just NZ$366m to reach NZ$4.1bn.
  • The jump in imports was attributed to a NZ$186m (+50%) rise petroleum and products imports, driven by increased imports of crude oil (up NZ$98m) and diesel (up NZ$73m), which was as a result of rising prices, volume imports down 13% year-on-year.
  • On the export side, meat and edible offal lead the uptick, rising by NZ$137m (+43%), with NZ exporting more beef and lamb at better prices. The export of sheep rose by NZ$83m (+55) and beef by NZ$45m (+31%).

The Kiwi Dollar moved from $0.66433 to $0.66387 upon release of the figures that came ahead of the business confidence number.

The September ANZ Business Confidence survey saw a net 38.3% of respondents expecting economic conditions to deteriorate over the next 12-months, improving from a net -50.3 in August.

  • Firms’ perceptions of their own activity prospects rose by 4 points to a net 8% expecting an improvement.
  • Retail expectations dropped 11 points to -13%, while services were the most optimistic.
  • A net 9% of firms are expecting to reduce investment, down by 4 points, while employment intentions rose by 5 points to -1%.
  • Profit expectations rose by 4 points to -13%, with retail the weakest sector, down 8 points to -35%.
  • A net 33% of businesses expect it to be tougher to get credit.
  • Firm’s pricing intentions rose by 3 points to +30%, while inflation expectations remained relatively steady at 2.1%.
  • Residential construction intentions jumped by 11 points to +24%.

The Kiwi Dollar moved from $0.66474 to $0.66701 upon release of the figures, before rising to $0.6673 at the time of writing, up 0.39%% for the session.

Elsewhere, the Japanese Yen was up 0.01% at ¥112.96 against the U.S Dollar, trade war jitters and geo-political risk supporting the Yen through the session. For the Aussie Dollar, it was an early bounce back, the Aussie Dollar up 0.30% to $0.7272 at the time of writing, supported by the spike in the Kiwi.

In the equity markets, with Trump’s address to the General Assembly, tonight’s FED policy decision, the roll out of FOMC economic projections, Powell’s press conference and Trump press conference having some influence, the Nikkei was down 0.24%, while the Hang Seng and ASX200 managed a positive start to the day, with gains of 0.39% and 0.30% respectively.

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The Day Ahead:

For the EUR, economic data is limited to unemployment numbers out of France, with the jobseekers total due out later this morning, the figures unlikely to have a material impact on the EUR as the markets look towards the UN and Trump’s American First campaign.

At the time of writing, the EUR was down 0.05% to $1.1761, with trade and geo-political risk continuing to be the key drivers as the FED delivers on policy and forecasts. The EUR could also face increased pressure as the Italian government gets ready to release its budget.

For the Pound, economic data is limited to mortgage approval numbers that will unlikely have an impact on the Pound, with focus remaining on Brexit chatter, which has yet to knock the Pound as talks of a 2nd referendum hit the news wires, British PM Theresa May’s failed Salzburg mission to gain support for the Chequers Plan a test to the British PM, though there is a reality that few envy May’s thankless task of leading Britain out of the EU.

At the time of writing, the Pound was down 0.08% to $1.3174 with Brexit chatter the key driver through the day.

Across the Pond, economic data scheduled for release later today is limited to August new home sales that are unlikely to have a material impact on the Dollar, as the markets focus on the FED’s monetary policy decision and, more importantly, the economic projections and Powell press conference.

While a rate hike may be baked in, with a December move also largely priced in, the questions will be on whether quarterly rate hikes are to continue through next year, on how the FED forecasts economic growth and whether concerns over the ongoing trade war have heightened since the last meeting.

Interestingly, while the FED press conference may have been considered the main even of the day, President Trump will also be delivering a speech, where he is due to discuss a number of items including the UN General Assembly and quite possibly a snipe at the FED for its persistence in moving towards monetary policy normalization. It won’t be the first time that the administration has come up against the FED, leaving the Dollar in the middle and it won’t be the last, the FED more than capable of winning this battle if it sets a hawkish policy path for next year.

At the time of writing, the Dollar Spot Index was up 0.06% to 94.187, with Trump and Powell to provide direction later in the day.

For the Loonie, there are no material stats scheduled for release, with the 30th September deadline on closing out NAFTA negotiations expected to be missed, raising questions on whether there will be an inclusion of Canada into any free trade agreement. With a number of deadlines having been previously set and missed and the markets becoming all too familiar with Trump’s tactics, there may be optimism of an eventual resolution that props up the Loonie.

At the time of writing, the Loonie was up 0.02% to C$1.2952 against the U.S Dollar.

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