QSBO likely to be more positive, supporting the currency; international equities deline

by Kymberly Martin

NZ Dollar

The NZD/USD sits little changed at 0.8600 this morning, having traded a 0.8580-0.8610 range over the past 24-hours.

While the strongest theme in currency markets since the start of the week has been USD weakness the NZD/USD has traded a fairly tight range.

The kiwi seemed happy to consolidate its Friday night gains, returning to trade at 0.8600 this morning.

Today’s release of the Quarterly Survey of Business Opinion should be NZD supportive. It looks likely to be even stronger than the previous release in January.

We expect increased impetus across the range of activity and inflation gauges i.e. nothing to challenge the NZD’s heights at this point. NZD/USD resistance will likely be encountered at 0.8640.Key support for the NZD/USD is seen in the 0.8500-0.8530 window.

Consolidation was also a key theme on a number of the NZD crosses.

For example the NZD/EUR sits only slightly lower at 0.6260 this morning.

By contrast, the NZD climbed against a soft AUD overnight. From intra-night lows around 0.9260 it now sits at 0.9290.

Expect some choppiness from the cross today as the QSBO and NAB business confidence survey follow each other in fairly close succession.

Resistance for the NZD/AUD is eyed at 0.9310. Support will be found approaching 0.9200.

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Majors

The main theme in currency markets overnight was USD weakness. The CHF was the strongest performer.

There was little in the way of new data overnight. Rather, the market continued in the direction it had begun following Friday’s US payrolls. US bond yields led the USD lower. The seemingly out-sized market response to a fractional disappointment on March payrolls suggests the market had got itself short Treasuries leading up to the event The USD index sits at 80.20 this morning.

Equities also continued to slump. The Euro Stoxx 50 closed down 1.4% and the S&P500 is currently down 1.2%. The moves in equities could also represent anxiousness regarding the earnings outlook, ahead of the Q1 earnings reporting season. Alcoa, the aluminium producer, will unofficially kick off the S&P quarterly earnings reporting season tomorrow. The season will confirm if there is anything more sinister to the recent equity sell-off.

European currencies were the key beneficiaries of USD weakness. The ‘safe haven’ CHF rose 0.5% relative to the USD. An uptrend in the EUR/USD was also assisted by data showing German industrial production grew 0.4% in February (0.3% expected), to be up 4.8%y/y. The EUR/USD climbed from 1.3700 last evening to 1.3740 currently.

Reversing Friday’s performance, the AUD was the weakest performed amongst its peers. The AUD/USD weakened, despite a soft USD. From 0.9290 last night it sits at 0.9260 this morning. Today, all eyes across the Tasman will be on the release of the March NAB business survey. Recall, last month the current conditions component fell from 5.1 to 0.

Today, the Bank of Japan will meet although it is not expected to announce any further stimulus, yet. That will likely come later in the year, prompting further JPY weakness.

Tonight, UK February industrial production and the NIESR’s March estimate of UK GDP will be released.

All its research is available here.