XE Morning Update - May 30, 2019

NZDUSD 0.6511 -0.5%
NZDEUR 0.5849 -0.2%
NZDGBP 0.5156 -0.3%
NZDJPY 71.27 -0.4%
NZDAUD 0.9417 -0.4%
NZDCAD 0.8800 -0.4%
GBPNZD 1.9390 0.2%

The NZD opens at 0.6511

A Risk-off atmosphere prevails today, with another escalation in the trade war. With respect to China’s potential retaliation, they came out saying “Don’t say we didn’t warn you”. The last 2 times this statement was used, was before China's border war with India in the 60’s, and before the China-Vietnam war in the late 70’s. Specifically what they seem to be referring this time is the export of Rare Earth materials, of which they control 90% of the world’s supply. Rare Earth minerals are essential to the manufacture of electronic components, and the ability for China to threaten an export embargo is going to be very powerful tool in negotiations.

As you can imagine stocks have not liked the move, and are looking poised to turn pretty ugly pretty quickly. Currency wise, the usual risk off flows have occurred, with the one exception being the AUD, which is holding steady. Whether this is the market finally taking notice of Iron ore prices being so high, or next week’s RBA cash rate decision being fully priced in, remains to be seen. It feels like the AUD has been a little oversold, and the path of least resistance is higher.

At 13:30 we have Building approvals and Private capital expenditure out of Australia, although these can be relatively volatile, so we don’t expect too much movement unless something drastic comes out. Locally the budget at 14:00 will be a focus, where the gaps of what have not been leaked will be filled in.
Global equity markets are down across the board on the day - Dow -0.87%, S&P 500 -0.69%, FTSE -1.15%, DAX -1.57%, CAC -1.70%, Nikkei -1.21%, Shanghai +0.16%.

Gold prices are up slightly to USD$1,281 an ounce. WTI Crude Oil prices off 0.4% to US$58.75 per barrel.

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