A preview of Donald Trump’s tax plans failed to shift the New Zealand Dollar to Australian Dollar exchange rate on Wednesday’s afternoon session, with the NZD remaining soft against the AUD.
The news that US corporation tax will be cut from 35% to 15% has left traders unimpressed, leaving US Dollar demand largely unchanged.
The final release of Trump’s tax reforms could still influence the US Dollar, which means NZD AUD volatility may yet be imminent.
(First published 13:10, April 26th, 2017)
The New Zealand Dollar (NZD) has declined marginally against the Australian Dollar (AUD) today, but could recover lost ground on future NZ dairy price news.
The latest drop sees the NZD AUD exchange rate trading close to a weekly low of 0.91, having opened trading on Monday at 0.93.
For future sources of New Zealand Dollar movement, it’s worth looking to the Global Dairy Trade auction on May 2nd. The auction measures changes in global dairy prices, which are a key part of New Zealand’s economy.
Price shifts in dairy have been sporadic over the past few months, but the most recent auctions have seen three price rises in a row.
The latest was particularly large, coming in at 3.1% compared to 1.7% in late March and 1.6% in early April.
If May’s early figure shows further dairy price growth instead of a drop, then a New Zealand Dollar to Australian Dollar rally could occur.
Global dairy prices have recently been placed in the spotlight by the US, which has criticised Canada’s apparent dairy industry monopoly. This action has been supported by New Zealand and Australian dairy industry leaders, which may ultimately lead to a greater share of global dairy exports from New Zealand.
In the near-term, US developments may cause the greatest Australian Dollar movement.
President Trump is fast approaching the end of his first 100 days in office, a historic milestone for US leaders.
Economists are currently scrutinising the President’s progress in meeting his campaign promises, many of which remain in their legislative infancy.
If traders decide that Trump’s pledges to slash taxes and spend around a trillion Dollars on infrastructure aren’t likely to materialise, then the US Dollar could drop heavily.
This outcome could greatly benefit the Australian Dollar as a crash in USD exchange rates may be enough to raise demand for ‘riskier’ currencies like AUD.
The odds of a Trump confidence slump are higher in light of recent approval ratings data. Since entering office, Trump’s approval score has dropped from almost 48% to nearly 41%, which is notably lower than any previous President.
Recent Interbank NZD AUD Exchange Rates
At the time of writing, the New Zealand Dollar to Australian Dollar (NZD AUD) exchange rate was trading down at 0.92 and the Australian Dollar to New Zealand Dollar (AUD NZD) exchange rate was trading up at 1.08.