By Kymberly Martin
NZD
The NZD/USD was the strongest performer over the past 24-hours. It was boosted by solid risk appetite overnight to trade at 0.8270 currently.
As broad risk appetite improved overnight (see Majors) the NZD/USD broke above its well established 0.8145-0.8245 range. Now sitting at 0.8270, the way has been opened for a return to September highs around 0.8350.
The NZ ANZ commodity price will be viewed with interest today. We will look for further signs of rebound from mid year lows.
Signs of stabilising commodity prices are important for the RBNZ. It is very wary of an environment where the strong NZD diverges from weaker commodity prices.
However, the key for the NZD over the coming 24-hours will be the US non-farm payrolls release, and developing expectations for the US election.
A positive payrolls number and signs that Obama’s approval ratings are improving in the wake of the super-storm would both likely be risk positive (USD negative), helping support the NZD.
The NZD also made gains on the major crosses overnight. The NZD/GBP is approaching key resistance as it has risen to 0.5130 overnight. The NZD/EUR also had the bit between its teeth as it moved steadily up toward 0.6400.
The key for the NZD/AUD (currently sitting at 0.7960) in the week ahead will be the RBA meeting (see Majors). If the RBA fails to deliver a cut the NZD/AUD would likely be knocked back in immediate response.
------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
Trading ranges were relatively contained overnight, though a generally positive risk backdrop supported out-performance by the ‘risk sensitive’ NZD, AUD and CAD.
Equity markets recorded positive returns across European and the US as our risk appetite index (scale 0-100%) ticked up to 69%.
There was a flurry of headlines from Europe regarding Greece’s ability to implement its austerity program. There were even suggestions troika requirements for Greece to implement pension cut/retirement reforms could be unconstitutional. Still, the market was prepared to look through this noise, concentrating instead on US data releases.
Generally the tone of US data was on the positive side with a stronger ADP employment report than expected, and the manufacturing ISM inching a little further into expansion at 51.7 (51.0 expected).
US polling also showed the vast majority approved of Obama’s handling of the super-storm crisis, likely boosting his prospects in next week’s elections. The USD index held its ground overnight, trading around 80.05 currently. Conversely the EUR/USD has slipped a little to 1.2930.
Early in the evening the GBP surged higher after comments from BoE’s Bean. He questioned how effective lower long yields (prompted by QE) might actually be in impacting demand. The market took the comments to suggest he was likely to vote for no additional QE at next week’s BoE meeting. The GBP/USD moved up from 1.6130 to around 1.6170 before giving up the gains overnight.
Overnight, the AUD was on the ascendancy along with its ‘risk sensitive’ peers the CAD and NZD. The AUD chopped around yesterday afternoon on the release of the Chinese manufacturing PMI releases.
However, both the official and the HSBC measure showed manufacturing activity in China improving, moving back toward expansion. This helps support the growing consensus that Chinese growth has bottomed mid year.
The AUD/USD was underpinned by the better risk appetite overnight. It has moved up to trade just below 1.040 at present, a key resistance level.
The biggest event on the horizon for the AUD will be next week’s RBA meeting. It is a close call as to whether the RBA will cut then, or wait a little.
The market prices around a 55% chance of a cut. Our NAB colleagues are now less convinced a cut will be delivered next week, though they still see a 3% cash rate by February 2013.
If the RBA does not cut, the AUD will likely get a knee-jerk boost, before the market assesses what the RBA’s intentions are going forward.
Tonight the key for markets will be the US payrolls number. A positive outcome (market expects 125k) would likely boost broad risk appetite, resulting in under-performance of the ‘safe haven’ USD.
Event Calendar:
2 November: NZ ANZ commodity prices; EU PMIs; UK PMI construction; US non-farm payrolls; US factory orders.
No chart with that title exists.
All its research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.