The New Zealand dollar bounced back as the last-minute deals to push out US tariffs on its neighbours Mexico and Canada allayed concerns about the impact on supply chains, while investors shifted their focus to China’s response.
The kiwi rose to 56.47 US cents at 7am in Auckland from 56.05 cents yesterday against a broadly weaker greenback. Investors cheered the deals struck by the North American nations to ratchet up efforts to stymie the illegal fentanyl trade, with stock markets across Asia clawing back losses on Monday.
The focus has turned to upcoming talks between US President Donald Trump and his Chinese counterpart Xi Jinping, which won’t take place on Tuesday as earlier speculated, after China responded with tariffs on energy imports, export controls on metals for use in semiconductors and an antitrust probe into Google-parent Alphabet.
“China retaliated against the additional 10% tariffs imposed by the US. But the scope was limited and is seen as a largely symbolic move, to avoid a full-blown trade war, which had little lasting impact on the FX market,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “The US dollar has now fully retraced the sharp move higher which began on Monday morning.”
European stock markets were stronger with automakers rallying on the cooling trade tensions and an optimistic outlook from Ferrari.
Black gold
Stocks on Wall Street bounced back, with the S&P 500 index up 0.6% in afternoon trading, with energy stocks including Chevron supporting gains. Oil prices were buoyed by the prospect of the US turning its attention to Iranian exports, with Brent crude oil futures up 0.2% at US$76.14 a barrel at 7am in Auckland.
The Nasdaq was up 1.1% with Alphabet gaining ahead of its earnings result after the bell, despite the Chinese probe. Data analytics firm Palantir surged after reporting strong December quarter sales.
That upbeat sentiment is expected to continue into the antipodes, with Australian futures indicating a 0.6% increase for the S&P/ASX 200 index today.
Milk prices rose at the latest Global Dairy Trade auction, with the GDT price index up 3.7% and an average winning price of US$4,296 a tonne, while whole milk powder prices – the key export for New Zealand’s dairy sector – gained 4.1% to US$4,169 a tonne.
Locally, Statistics New Zealand will release December quarter labour data which are expected to show the unemployment rate rose to 5.1% from 4.8%. That would be in line with the Reserve Bank’s forecast and keep the central bank’s plans for further rate cuts intact.
Chinese markets return from their Lunar New Year holiday today, while New Zealand will be closed on Thursday for the Waitangi Day holiday.
Reporting by Paul McBeth. Image from Max van den Oetelaar on Unsplash.