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AUD: Any idea that the Aussie had turned a corner in the sentiment stakes was put to rest this week as it moved lower on a broad front. It held its own until Tuesday but then headed decisively south. The Aussie lost almost one US cent and it fell by nearly two against sterling. Its troubles were the result of a cocktail of confidencedenting developments. Reports of a trade deal between Washington and Beijing looked ever less plausible as the White House failed to spell out what had been agreed.
Turmoil in global stock markets killed investors’ appetite for “risky” currencies. When the Reserve Bank of Australia kept its Cash Rate benchmark unchanged at 1.5% its statement gave no hint of any increase in the pipeline. As for sterling, investors became less boot-faced about it after a government defeat in the Commons appeared to hand more control of Brexit decisions to Parliament. Therefore, or so the thinking went, a no-deal Brexit had become far less of a possibility.
NZD: True to form, New Zealand released vanishingly few useful economic statistics during the week. The terms of trade index, which measures the relationship between imports and exports, deteriorated to -0.3%. The fortnightly GDT index of milk prices was up by 2.2%. ANZ’s commodity price indicator fell 0.6% in November. On balance the numbers did not work well for the Kiwi. It was external factors, however, which had the greatest potential impact on the NZ dollar. Optimism about a trade agreement between the US and China faded as the White House failed to spell out any details. Turmoil in global equity and bond markets sapped investors’ appetite for risk. The safe-haven Swiss franc and Japanese yen were the week’s top performers while the commodity-oriented currencies struggled. Nevertheless, the NZ dollar came out of it unscathed, actually strengthening by four fifths of a cent against sterling and adding a fifth of a US cent.