By Kymberly Martin
NZD
The NZD was the weakest performer in the past 24 hours. The NZD/USD sits close to its critical support level at 0.8160 this morning.
A generally softer tone in US data overnight had the combined effect of reducing appetite for USD and ‘risk sensitive’ currencies such as the CAD, AUD and NZD.
The heavier toll was taken on the latter group, with the NZD/USD slipping to find support in the crucial 0.8150-0.8200 window.
Yesterday, the NZ Budget confirmed the Government is still on track to achieve a surplus (albeit by a slither) by 2015.
Overall, the Budget confirmed the relatively enviable position the NZ economy is in compared to many of its developed market peers, where severe austerity programmes are necessarily being implemented, stifling growth.
After the Budget, rating agencies were quick to affirm the NZ sovereign’s current ratings (S&P, AA, Fitch, AA, Moody’s, Aaa).
Relative growth, (along with interest rate differentials and supportive commodity prices) is one of the key factors supporting our medium-term constructive position on the NZD.
Our short-term NZD/USD ‘fair value’ is still in a lofty 0.8450-0.8850 range. We continue to look for a bounce in the NZD, though today key support levels will be tested.
Overnight, the most notable move on the NZD crosses was the NZD/GBP. It slipped from around 0.5420 to sit at 0.5340 this morning, its lowest level since mid-February.
Today’s domestic data releases (PPI, ANZ Consumer Confidence) are unlikely to be market moving.
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Majors
Over the past 24-hours the ‘risk sensitive’ CAD, AUD and NZD were the weakest performers. The GBP has been the strongest performer.
Overnight, US data was broadly softer-than-expected. Most notably, April housing starts fell 16.5%m/m (-6.4% expected), and the Philadelphia Fed survey came in at -5.2 (2.0 expected).
US inflation was also shown falling 0.4%m/m in April. Excluding food and energy, inflation rose only 0.1%m/m (0.2% expected).
The US Federal Reserve will be alert to the low inflation environment, suggesting tapering of asset purchases may be further away than previously anticipated by the market.
US long yields have pulled back to sit around 1.87%. The USD index declined from overnight highs close to 84.00 before finding support around 83.50 this morning.
As risk appetite was dampened slightly the ‘risk sensitive’ CAD, AUD and NZD underperformed their peers. The AUD/USD slipped from around 0.9900 before stabilising around 0.9800. Given current downward
momentum, from a purely technical perspective there appears little support for the AUD/USD until the 0.9660 to 0.9700 window. The currency has rebounded from this level on many occasions over the past two years.
The GBP appeared to be a default beneficiary of currency weakness elsewhere. The GBP/USD has crept up from overnight lows around 1.5200 to sit at 1.5280.
It should be a relatively quiet end to the week for currencies with no key data release scheduled globally or in Australasia.
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