by Kymberly Martin
NZ Dollar
The NZD/USD sat a fraction lower at week end, at 0.8690, having traded a fairly tight range on Friday.
The lack of NZD volatility over the latter part of last week was striking.
This was despite significant global geopolitical developments and a plunge and subsequent rebound in global risk appetite.
The NZD/USD traded a fairly unassuming path between 0.8650 and 0.8690 on Friday, closing at the upper end of this range.
Key support for the currency remains at 0.8650 as we enter a relatively quiet start to the week. NZ net migration and credit card billings are the only data scheduled for today, in a week dominated by Thursday’s RBNZ meeting.
While we anticipate a further 25bps OCR hike at the meeting, this is fairly well priced by the market.
The RBNZ has been tracking migration data closely, recently. It anticipates the recent surge in net migration should taper off soon. It is worth assessing today’s June figures in this context (May’s net monthly flow was +3,980).
On the crosses, the NZD was a little stronger relative to key European peers on Friday, but weaker relative to the AUD.
The NZD/AUD ended the week around 0.9250, close to where we see current fundamental ‘fair value’.
There is not too much on either side of the Tasman to drive the cross today.
AU highlights come later in the week, in the form of Wednesday’s CPI data, andtomorrow’s speech by RBA Governor Stevens to the Anika Foundation.
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Majors
Despite some currency volatility on Friday night, most currencies did not make large gains or losses. The AUD was the strongest performer.
Risk appetite rebounded on Friday night, despite Ukraine-linked headlines continuing to dominate the media. Both the US and the Ukraine claim compelling evidence of Russian involvement in the Malaysian Airlines catastrophe. However, our global risk appetite index (scale 0-100%) rebounded from 71% to 80%. The US S&P500 rose 1.0%.
In a data-light evening, the USD index mostly dabbled sideways, although briefly surged higher as US equities opened higher and the EUR/USD appeared to break through key support levels. The USD showed little response to the release of the University of Michigan Confidence index that slipped to 81.3 in July (83.0 expected). The USD index ended the week at 80.50.
The EUR/USD broke through key support around the 1.3510 level early on Saturday morning. This has marked the low on the currency since early February. It dipped toward 1.3490 before recovering to end the week at 1.3520.
The CAD responded to the release of Canadian CPI early on Saturday morning. The June reading came in at 2.4% y/y (2.3% expected), the highest reading since early 2012. Earlier in the week, the Bank of Canada had suggested recent CPI gains were not reflective of broader macroeconomic conditions. The USD/CAD briefly dipped below 1.0710 on the result before coming to rest around 1.0730.
The AUD was on the ascendancy for most of Friday, assisted overnight by the general improvement in risk appetite. It is once again flirting with the 0.9400 level, ending the week at 0.9390.
It is a light data agenda tonight with only UK house prices and the US Chicago Fed activity index scheduled for release.
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1 Comments
The issue of the bombing should have already been factored in by most people. A plane load of AIDS researchers shot down in an active warzone currently under the influence (not necessarily control) of pro-Russian forces... when Russia is actively anti-homosexuality reform.
The only real question is who paid whom to fly a suide civilian aircraft over that territory?
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