By Kymberly Martin
NZD
After yesterday’s RBNZ meeting the NZD/USD moved back above 0.8200, to sit around 0.8220 currently.
As anticipated, the RBNZ delivered a steady statement yesterday that reiterated many of their former comments. However, it was less dovish than the market had expected.
Consequently the NZD/USD jumped higher, finding resistance at 0.8240 overnight, the level that has marked the top of its range this month.
The NZD was also propelled higher on the crosses. It built on its gains relative to the EUR and AUD overnight, taking the NZD/EUR to 0.6350.
However, the NZD/GBP came under some downward pressure overnight, after the positive surprise on UK GDP (see Majors). The broadly stronger GDP resulted in the NZD/GBP falling from highs above 0.5130 back to below 0.5100.
There is little on the domestic data agenda today to drive the currency, though look out for the release of NZ trade data this morning.
Also, the RBNZ has announced Graeme Wheeler will make his maiden speech as Governor today, at 9.00 (NZT). It is entitled “Central banking in a post-crisis world”. Such speeches usually do not contain anything on current policy settings or outlook. But, you never know. We’ll see if there is any further colour around yesterday’s OCR announcement.
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Majors
Overnight, while most currencies traded in fairly tight ranges the GBP was the star performer after data confirmed the UK has exited recession.
Generally the tone in markets overnight was relatively unexciting. Our risk appetite index (scale 0-100%) held up at 69%, and equity markets hovered either side of flat.
The key data surprise came from UK GDP. It was shown bouncing from negative growth to record 1%q/q in Q3 (0.6% expected). This is its fastest growth rate since Q3 2007.
Much of the bounce can be attributed to the one-off effects of the Olympic Games. Still, our economists now see upside risks to their forecast that the UK economy contracted 0.4% over the calendar year as a whole. The GBP/USD surged from 1.6040 to sit around 1.6120.
Elsewhere, markets were somewhat directionless, responding to rumours and data snippets. US durable goods orders (ex-transport) came in above expectation at 2.0% (0.9% expected), while pending home sales disappointed (0.3%m/m vs. 2.5%).
With half of the S&P500 companies having now reported Q3 earnings, growth has slipped to -2.0%. The USD index found support at 79.70 overnight before returning to the now very familiar 80.00 level.
Conversely, the EUR/USD paddled up as high as 1.3020 before drifting off to 1.2950 this morning.
The AUD/USD found resistance at 1.0390 overnight, returning to trade at 1.0360. The Nov 6 RBA meeting stands on the horizon as the next major landmark for the AUD.
Post this week’s high-side CPI reading the market has pared back expectations of a rate cut at the meeting to 55%. Our NAB colleagues remain confident the cash rate will be cut to at least 3% (currently 3.25%) by February.
However, the timing of the next cut is now less certain. In the day ahead there a few data releases in the Asian session. Tonight however, the US releases Q3 GDP and the final reading of the University of Michigan consumer confidence survey.
Event Calendar:
26 October: NZ trade balance; US Michigan consumer confidence; US GDP
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