by Kymberly Martin
NZ Dollar
The NZD/USD sits a little lower at 0.8700 this morning, having made intra-night highs above 0.8740.
The NZD did not show much response to yet another strong domestic data point yesterday.
The seasonally adjusted BNZ PMI for March was 58.4. This was 1.9 points higher than February and the highest level of activity since July 2013. The sector has now been in expansion for nineteen consecutive months.
Yesterday afternoon and last evening the NZD/USD tried to sustain breaks above 0.8740 but failed.
It has returned to trade around 0.8700 currently. Resistance will be encountered on any attempt to revisit 0.8740. Support is seen at 0.8650.
The NZD also weakened on most crosses overnight, most notably relative to the JPY CHF and AUD. The NZD/AUD experienced heightened volatility over the past 24-hours.
After the stronger than expected AU employment report the NZD/AUD gapped lower, from 0.9310 to 0.9260. It continued to bump lower overnight to sit at 0.9230 this morning.
Given fairly subdued risk appetite overnight (our global risk appetite index fell from 70% to 64%), the ‘safe haven’ JPY outperformed. The NZD/JPY fell from 89.20 yesterday afternoon to 88.20 currently.
Today, NZ food prices will be delivered. REINZ house price data is also scheduled to become available.
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Majors
Over the past 24-hours the USD has continued to weaken while the JPY has been the strongest performer.
Overnight, the post-FOMC euphoria in equity markets faded. The S&P500 is currently down 2.0%, led by the healthcare and I.T sectors. It is early days in the S&P reporting season with only 25/500 companies having reported. Still, only modest earnings surprise (1%) has been recorded so far, while there has been marginally negative sales surprise (-0.25%).
As US Treasury yields continued South, the USD limped lower overnight. The USD index sits at 79.40 this morning, close to its mid-March lows. The ‘safe haven’ JPY and CHF were the key beneficiaries of the more sombre market tone. The USD/JPY slipped to 101.40.
The AUD has suffered further volatility over the past 24-hours. Yesterday afternoon’s employment report showed a surprise fall in the AU unemployment rate to 5.8% in March, from 6.0% in February. The RBA’s most recent policy statement anticipated further deterioration in the labour market. Any further rate cuts by the RBA had already been priced out of the market and today’s release cemented that position. The AUD/USD rose sharply on the report. From 0.9380 it gapped to 0.9440.
However soon after, Chinese trade data were released. While the trade balance was larger than expected, both exports (-6.6%y/y) and imports (-11.3%y/y) fell. The data should be interpreted with care as sharp contractions in trade with HK and Taiwan appear to be distorting the broader picture. Still the AUD/USD slipped back on the data, before touching intra-night highs of 0.9460.
Today, China CPI data will be released. The US University of Michigan Consumer Confidence survey is due tonight. The World Bank and IMF also kick off their Spring meeting.
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