HiFX Morning Update, May 18 2018

The NZDUSD opens lower at 0.6874 this morning.

The USD strengthened, and NZDUSD fell, after US bond yields (interest rates) rose to 7-year high, and amid concerns over political developments in Italy could negatively impact euro zone political stability.

Rising US bond yields suggest a more optimistic outlook for the US economy – reinforced by the overnight release of much better than expected Philly Fed Manufacturing Index. This supports expectations that the US Federal Reserve will continue to lift interest rates – the USD generally performs wells in such an environment.

NZ Budget was released yesterday. There was nothing earth-shattering in the announcement and had limited impact on the NZD.

US Investment Bank, Morgan Stanley, forecast the NZDUSD to fall another 4% by end of 2018 as high NZ household debt levels leave the economy vulnerable to higher US interest rates.

The NZDAUD dipped to a 3-month low of 0.9142 overnight.

The GBP staged a short rally on reports that Britain was prepared to stay in the EU’s customs union beyond a Brexit transitional arrangement.

There is no data on the domestic calendar today.

Global equity markets were higher on the day – Dow +0.1%, S&P500 0.2%, FTSE +0.7%, DAX +0.8%, CAC +1.0%, Nikkei +0.5%, Shanghai -0.5%.

Gold prices gained 0.2% to USD$1,291 an ounce. Oil prices (WTI) rose 0.1% to USD$71.56 per barrel.

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