By Kymberly Martin
NZD
The NZD/USD plunged on yesterday’s weak NZ employment report. But it soon found support just above 0.8160 where it has traded all night.
Yesterday’s NZ employment data proved the downside risk we had feared. The rise in the Q3 unemployment rate to 7.3% from 6.8% previously, prompted an immediate response from the NZD.
The NZD/USD gapped from 0.8260 to around 0.8180. Still, it quickly found its feet and has consolidated just below this level. It remains well within the 0.8100 to 0.8350 range that has contained the currency since mid-September.
After its post-employment data plummet on European crosses, the NZD has traded very tight ranges overnight. The NZD/EUR sits just above 0.6400.
The NZD/AUD took two large steps down yesterday. The first was precipitated by the NZ employment report. The second followed the AU equivalent, which actually surprised on the positive side (see Majors).
At 0.7830 the cross is now trading at levels last seen in mid-September. Whether the cross can find some support today will likely be influenced by scheduled Chinese data releases.
Any disappointment in this data would likely be AUD negative, helping curtail the sharp NZD/AUD fall. However, if the data confirms that China growth is rebounding from its mid-year lows the NZD/AUD may test key support at 0.7800.
This morning REINZ housing data will be released. This will be important, as the RBNZ assesses simmering house price pressures.
There is little offshore data tonight. Expect the NZD to take its cue from Chinese releases today and developments in risk appetite generally. For now, support at the 0.8100 level looks strong. Near-term resistance is eyed at 0.8200.
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Majors
Currency markets were surprisingly subdued overnight, as they returned to business as usual after the US elections. The USD index consolidated just below 80.90.
Markets were without strong direction overnight. Our risk appetite index (scale 0-100%) has held on around 67%, as European equities recorded modest negative returns. The S&P500 is however slipping into the close, currently down 0.80%.
Attention moved back across the Atlantic with central bank meetings for the BoE and ECB.
No surprises were delivered as both remained ‘on hold’. ECB President Draghi’s comments highlighted the weakness in European growth that lies ahead but also suggested a rate cut is not on the immediate horizon. The EUR/USD moved a little lower to 1.2740.
The Bank of England stated it does not intend to buy any further bonds beyond the £375b already purchased. The BoE has thus far been one of the most aggressive central banks in undertaking quantitative easing.
It will now focus on stimulating bank lending through its ‘Funding for Lending Scheme’. The GBP/USD showed a bit of volatility around the announcements but has returned to trade above key support levels at 1.5980.
The ‘safe haven’ JPY remains the one clear out-performer. The USD/JPY fell further from 79.90 to 79.40
The AUD/USD consolidated above 1.0400 over the past 24-hours. In contrast to the NZ employment report the AU equivalent was fairly benign. The unemployment rate remained steady around 5.4% (5.5% expected), even though employment growth remains weak.
While the data initially gave the AUD/USD a shot in the arm, upward momentum was not maintained. All focus today will now been on the wide range of Chinese data releases.
The market expects data to be consistent with growth beginning to rebound from its mid-year trough. Any disappointment on this front would be harshly felt by the AUD (and less directly by the NZD).
Elsewhere there are few data releases of note. The market will likely remain focused on headlines relating to the US fiscal cliff debate.
Event Calendar:
9 November: NZ ECT data; CH data slug; EU finance ministers seek agreement on 2013 EU budget.
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