By Kymberly Martin
NZD
The NZD/USD has softened a little overnight, sitting around 0.8150 at present.
Early this morning, the GDT milk auction showed global dairy prices rose 0.7% on average compared to the previous event a fortnight ago.
Overall, the strong uptrend in dairy prices from the mid-May lows appears to be maturing. The rate of price increase has slowed over the past two months. This is consistent with our view that rising commodity prices should support the NZD in the months ahead.
Yesterday’s RBA minutes show it maintains a clear easing bias, but did little to shift market expectations of rate cuts ahead. Subsequently the NZD/AUD has traded a very tight range around the 0.7860 level.
The NZD was weaker relative to its key European peers. The EUR was buoyed by some cautious optimism regarding the outcome of the Eurogroup negotiations on Greece. The NZD/EUR slipped from above 0.6410 to sit around 0.6370.
The NZD/JPY traded sideways. The JPY continued its recent weakness, as the market speculates about further quantitative easing from the Bank of Japan following the December elections (see Majors). The NZD/JPY currently sits around 66.60.
Today’s release of NZ credit card data is unlikely to be market moving. The more important driver of the NZD will be broad risk appetite.
If the S&P500 continues its weakness into the close it would set a negative precedent for the day ahead. For now, support for the NZD/USD is eyed at 0.8080 while resistance remains at 0.8200.
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Majors
The USD consolidated overnight, while the JPY continued its losing streak.
Our risk appetite index (scale 0-100%) appears to have stabilised above 70%. European equity markets eked out modest positive gains. However, the S&P500 has failed to hold onto earlier gains, currently declining into the close.
The USD paddled steadily sideways just below the 81.00 level overnight. In a scheduled speech, Fed Chairman Bernanke added his two-cent’s worth to the fiscal cliff debate. He called on politicians to be cooperative and creative in finding a long-term solution to the US budgetary issues, without harming the near-term recovery.
The EUR/USD also traded a fairly tight range just above 1.2800. There appears cautious optimism regarding a deal for Greece from the current Eurogroup meeting. Offsetting this however was yesterday’s downgrade of France by rating agency Moody’s.
The JPY continued its recent weakening trend although the Bank of Japan resisted announcing any further monetary easing measures yesterday.
The focus will now be on the next BoJ meeting which will fall just after the Dec 16 Japanese elections. The leading contender to become Prime Minister, Abe, has been vocal in his desire to see more aggressive easing from the BoJ. The USD/JPY rose from 81.20 to 81.70 overnight, its highest level since April.
The AUD/USD was a little softer overnight. Yesterday’s RBA minutes suggested the RBA maintains a clear easing bias, though whether it will cut next month remains a close call (see Fixed Interest). The AUD/USD slipped from highs last evening above 1.0420 to sit around 1.0360 currently.
Today, the market will look for further news flow from the Eurogroup meeting. Tonight, focus will return to the US where mortgage applications and the final reading of the University of Michigan consumer confidence survey will be released.
Event Calendar:
21 November: NZ GDT dairy auction; NZ credit card billings; UK BoE MPC minutes; UK public sector borrowing; US jobless claims; 22 November: NZ migration; CH HSBC Flash PMI; EU Flash PMIs; 23 November: EU German IFO.
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