By Kymberley Martin
NZD
The NZD was the strongest performer over the past 24 - hours, as US bond yields consolidated and risk appetite inched higher.
Yesterday, February's BNZ PMI rose to 57.7 from 50.8 in January. The result is one out of the box, being the highest reading in almost two years. The details were strong too.
Importantly, the new orders component jumped from 50.6 to 63.1. Production and new orders components are now at their highest level since 2004. As a cautionary note, it is only one month’s data, and in the context of a generally low level of manufacturing activity in recent years.
However, we see it as early signs of growth off a low base. As the NZD is more focused on global developments at present, its response to the local release was rather muted.
Overnight the NZD started on a steady upward path, underpinned by solid global risk appetite. Having found support around 0.8060 yesterday afternoon, it rose to trade at the familiar 0.8200 currently.
Strength in the NZD was wide reaching on the crosses. It made steady gains relative to the AUD and its European peers. The NZD/AUD traded up from 0.7750 to just above 0.7780 at present, looking fairly comfortable within its recent range.
There are no NZ data releases today, so expect the NZD to take its cue from global sentiment. NZD/USD support is seen at 0.8140 and resistance at 0.8250.
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Majors
Reversing the previous day’s move, broad USD weakness was the key theme over the past 24 - hours, as risk appetite improved further and US bond yields stabilised.
Our risk appetite indicator (scale 1-100%) has inched higher to 70.4%. Overnight, equity markets made moderate gains, with the Euro Stoxx 50 closing up 0.74% and the S&P500 currently up 0.35%.
As markets sought our more “risky” assets the USD was on a gradual downward path, giving up much of its previous day’s gains.
Its drift lower, was not curtailed by generally positive US data releases overnight. Data showed US jobless claims fell last week to match a four year low.
US consumer confidence rose to the highest level since 2008. Improvement in the manufacturing sector was confirmed with the Empire Manufacturing index rising to 20.21 (17.50 expected).
In addition, the Philadelphia Fed survey of businesses rose to 12.5 (12.0 expected). US bond yields consolidated below the 2.30% level. In this backdrop demand for the USD waned in favour of more risky assets. The USD index slipped to around 80.10 this morning from 80.60 last evening.
The EUR/USD bounced higher overnight from around 1.3040 to trade above 1.3100 currently. The GBP/USD left its surge higher until the recent hours of this morning. It was boosted by comments from Bank of England policy maker, Broadbent.
He suggested easing in overseas risks could warrant a withdrawal of monetary accommodation even if UK debt-income ratios remain high. The GBP/USD rose from around 1.5660 to 1.5720 currently.
In the backdrop of robust risk appetite the AUD/USD was on a steady upward path overnight. It is currently trading close to its highs for the night, just below 1.0540.
Even the JPY managed to curtail its recent losing streak yesterday, as the USD suffered from the fickleness of currency markets. The USD/JPY fell from around 84.10 last evening to trade around 83.30 currently.
Tonight, Eurozone employment data will be released along with the Eurozone trade balance. The key data release will be the University of Michigan Consumer Confidence survey.
The market will be looking to see if the recent improvement in US data is feeding through to consumer confidence that will then lead to stronger spending etc. US CPI data will also be released.
The US Federal Reserve at its last meeting mentioned the risks of higher oil prices, but suggested overall it was comfortable with the inflation outlook. Consensus expects US CPI ex - food and energy at 2.2%y/y in February.
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