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Data and risk-on fail to keep the NZD party rising; VIX falls back again. Markets look to Yellen for boost but may be disappointed

Currencies
Data and risk-on fail to keep the NZD party rising; VIX falls back again. Markets look to Yellen for boost but may be disappointed

by Raiko Shareef

NZ Dollar

The NZD is little changed against the USD, just a smidgen lower at 0.8800.

It is slightly curious that NZD and AUD did not perform better overnight, given that the theme (if any) was mildly risk positive. Instead, NZD/USD drifted lower in the early hours of this morning, dipping below 0.8800 for a brief period.

Yesterday’s local data had little impact.

The REINZ June housing data was arguably the more interesting release, showing annual house price inflation cooling from 6.5% y/y to 6.2%. House sales stabilised after a sharp drop the previous month. These figures look broadly in line with RBNZ expectations.

The local session looks fairly uneventful, with only the RBA’s July Board Minutes to contend with. Given the wealth of information we’ve received from Governor Stevens since then (3 July Hobart speech, 13 July interview in the Australian), these seem unlikely to be particularly revealing.

Instead, NZD will more likely take its cues from US macroeconomic data, and Fed Chair Yellen’s semi-annual testimony to Congress.

Today, we see resistance at 0.8840, and initial support at 0.8780.

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Majors

A deathly quiet night, with very little for markets to move on. Investors seem to be bracing for the main events later on, in particular Fed Chair Yellen’s speaking engagements in front of US lawmakers, which kick off tonight.

If anything, there was a mild risk-on tone, a reversal from last week’s generally sour atmosphere. One part of this is likely to due to the lack of any further banking hiccups in the Iberian Peninsula. Banco Espirito Santos’ woes look to be isolated, for now. Adding to the feel-good mood for investors, Citigroup beat profit expectations in its Q2 earnings report, even after it settled a mortgage-related probe by the US Justice Department for a cool $7bn.

So, equity indices are higher, with Europe outperforming as it plays catch-up after last week’s sharper losses. The Euro Stoxx 50 gained 0.9% against the S&P 500’s 0.5% rise. The safe-haven bid JPY is 0.3% weaker against the USD to 101.60. Ditto for gold, which shed 2.2% to $1,308.  The VIX volatility index is halfway back to the post-GFC low it struck two weeks ago, currently at 11.7.

Apart from the JPY, there is little to say about major currencies. The USD is unchanged from 24 hours ago in terms of both the euro-centric US Dollar Index (DXY) and the broader Bloomberg Dollar Spot Index (BBDXY). The GBP continued to drift off its five-year high against the USD, ahead of important inflation and employment prints this week. GBP/USD is 0.2% lower at 1.7080. ECB President Draghi’s appearance in front of European Parliament came and went without causing any waves, as he stuck largely to script.

The next 24 hours should prove slightly more interesting than the last. As well as fairly important economic data on the cards (UK inflation, US retail sales, US Empire manufacturing), the market will be treated to the first leg of Fed Chair Yellen’s appearances on Capitol Hill this week. We’re on the lookout for any acknowledgement of a faster-than-expected improvement in the labour market, but we’re not holding our breath.

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Source: CoinDesk

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