NZ Dollar Loses Gains After Rallying on US-China Trade Deal News, Domestic Data Doesn’t Support

The New Zealand dollar climbed intraday as reports about a phase-one trade deal between the United States and China put markets into a risk-on mode. Currently, though, the kiwi has lost its gains versus most of its major rivals, trading either flat or slightly lower. The New Zealand currency managed to keep gains versus the Australian dollar but was unable at all to rise versus the euro and the Great Britain pound. Domestic macroeconomic data released early during the Asian trading session was not supportive of the New Zealand dollar.
According to reports, the United States and China have signed a phase-one trade deal. Under the agreement, China will buy $50 billion worth of US agricultural goods in 2020, while the United States will put on hold tariffs that were planned to kick in on December 15. Furthermore, both countries will cut the current tariffs by half. Neither side made an official announcement yet, though US President Donald Trump twitted yesterday that they are close to a “big deal”. Nevertheless, markets welcomed the news even without official confirmation.
As for domestic data, the seasonally adjusted BusinessNZ Performance of Manufacturing Index demonstrated a decline to 51.4 in November from 52.6 in October. Remaining above the neutral 50.0 level of no growth, the index suggested that manufacturing continued to expand but at a slower pace. It was the second consecutive month of expansion. BNZ Senior Economist Doug Steel commented on the result:

If October’s big lift in the PMI suggested the worst of NZ’s economic slowdown was behind us, November’s consolidation suggests any acceleration is not going to be in a straight line.

NZD/USD was up from 0.6595 to 0.6635 intraday but backed off to 0.6600 as of 14:58 GMT today. EUR/NZD climbed from 1.6855 to 1.6942 before retreating to 1.6891. AUD/NZD fell from 1.0466 to 1.0437, pulling back from the session high of 1.0487.

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