Unlike its Australian peer, the situation for the Kiwi appears less appealing following the reading of both inflation and labor
data that confirm increased sensitivity of New Zealand from the US – China trade discord, prompting further easing from the Reserve Bank of
New Zealand. In this context, the New Zealand dollar is expected to stay under pressure in a context of economic slowdown.

Although optimism on the front of the Sino-American trade conflict grows, idiosyncratic risk is expected to drag NZD progression, as
economic headwinds continue to weigh. The fall of inflation in the third quarter to 1.50% (prior: 1.70%) back to 1Q range and maintained
within 1% – 3% target band, yet still below the 2% midpoint, combined with mixed labor data strongly affected by a trade slowdown, should
favor the odds of additional easing of the RBNZ Cash Rate at its 13 November 2019 monetary policy meeting. In this respect, 3Q unemployment
rate rose 4.20% (prior: 3.90%) above expectations of 4.10% while employment and hourly earnings declined to 0.90% (prior: 1.70%) and 0.60%
(prior: 1.10%) respectively, thus confirming persisting softening economic momentum. As a result, the latter reinforces the scenario of
an RBNZ rate cut decision of 0.25 percentage point to historical low 0.75%, the third rate cut of the year. The NZD bearish bias should stay by
next week policy decision while the commodity currency is expected to lag behind AUD until year-end.

By Vincent Mivelaz

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