Currencies
Fed spokesperson talks up US economic recovery story
20th Mar 12, 8:12am
by
By Kymberly Martin
NZD
It was fairly steady 24-hours for the NZD, though it benefited from USD selling early this morning. It has moved up to trade around 0.8270 currently.
Yesterday’s local data confirmed the general sense of an economic recovery becoming established. The Westpac consumer confidence index rose form 101.3 to 102.4 in Q1.
In addition, the Performance of Services Index consolidated the message from last week’s PMI, moving up from 53.6 to 55.5 in February.
This underpinned the NZD around the 0.8250 level most of yesterday. Early this morning, the NZD moved up to almost touch 0.8290, before returning to trade at 0.8270.
Trading on the NZD/AUD cross was without much drama over the past 24-hours. Some attention was on the RBA’s Stevens overnight as he spoke in Hong Kong.
He noted that an economic slowdown in China appeared to have been largely factored into the AUD, and acknowledged that recent Australian data had been ‘a little mixed’.
The NZD/AUD touched a high just below 0.7810 overnight before returning to trade around 0.7790 currently. Our medium-term view remains for a higher NZD/AUD underpinned by improving interest rate and growth differentials.
Today there are no NZ data releases. However the release of the RBA minutes for March has the potential to provide some volatility on the cross. For now, we see resistance for the NZD/USD at the overnight highs close to 0.8290. Support is seen at 0.8230.
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Majors
The USD lost ground relative to all its peers over the past 24-hours, though moves were relatively contained.
Our risk appetite indicator (scale 0-100%) is clinging on at the elevated level of 71%.
The Euro Stoxx 50 closed flat, and the S&P500 is currently up 0.70%. The CRB global commodities index made modest gains, rising 0.60%.
The USD was trading in a very tight range for much of the night, as was the EUR. Early this morning, the USD was sold in favour of the EUR. It is difficult to pinpoint the precise trigger.
There’s talk of custodial name activity in EUR flows, and a further rush of USD weakness impacted by technical trading and leveraged accounts.
In addition, headlines around the time, that Greek Credit Default Swaps (CDS) insurance contracts had successfully been settled, no doubt helped sentiment toward the EUR. The EUR/USD moved up from 1.3160 to trade around 1.3240 currently.
Conversely, the USD index shifted down from 79.80 to 79.40 currently. Early this morning, US Federal Reserve representative, Dudley, stated the US recovery “may be getting established”.
Further Fed comments from Chairman Bernanke tonight have the ability to impact the USD, especially if he adds further weight to his recently, slightly more rosy assessment of the US economy and global risks.
Overnight, the JPY showed choppy trading, but returned to trade at 83.40. The USD/JPY appears to be taking a breather around current levels, after its massive surge higher since the start of February, triggered by the announcement of further QE from the Bank of Japan.
The AUD also traded choppily over the past 24-hours, but moved up in the early hours of this morning. It attempted to touch 1.0640 before dropping back to trade just below 1.0620 at present.
Today’s release of RBA minutes for March has the potential to impact the currency. Any hints the RBA is shifting away from its easing bias, or that rate cuts in the year ahead will be less than the 40bps priced by the market, could boost the AUD.
This evening UK CPI data will be released. A fall in the core rate to 2.3% (expected) from 2.6% previously will be required to give the Bank of England comfort in its currently highly stimulative monetary policy.
US housing starts data will also be released.
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