By Kymberly Martin
NZ Dollar
The NZD has consolidated over the past 24-hours, to sit at 0.7790 this morning.
After the sharp selling of the NZD in the wake of the RBNZ’s transaction data release, trading has now resumed a more measured pattern.
Over the past 24-hours, the NZD/USD has traded a broad range between 0.7740 and 0.7820.
There was little direct currency response to yesterday’s release of the ANZ business confidence survey. This showed confidence was dented in the run-up to the recent General Election, falling from 24.4, to 13.4, its lowest level since mid-2012.
More telling will be if it can bounce in the October reading, now election uncertainty has subsided.
On the crosses, the NZD bounced relative to the JPY and its European peers overnight. The NZD/GBP and NZD/EUR sit at 0.4810 and 0.6170 respectively. The NZD/AUD now sits at 0.8910, with support still seen at the early-September lows of 0.8850.
There are no domestic data due today. The NZD/AUD will likely take its cues from AU data releases and the China PMI. A solid PMI reading would likely benefit the AUD more than the NZD.
Early tomorrow morning, it will be all eyes on the latest GDT dairy auction. We don’t’ have a strong view on price direction at this auction. But it is worth noting prices will need to bounce a fair chunk in coming months in order to justify Fonterra’s recently-lowered milk price forecast of NZ$5.30.
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Majors
The USD pushed higher as the EUR responded to a low-side CPI reading last night. Northern European and Antipodean currencies outperformed.
Data released last night showed the EU unemployment rate steady at 11.5% in August. But the surprise came in the September reading of core CPI. It came in at 0.7% (0.9% expected). This saw the EUR/USD gap lower, falling toward 1.2570, before finding support and rebounding to 1.2630 this morning. Eurozone equities closed up 1.2%, presumably assisted by the prospect of continued stimulative policy from the ECB.
The GBP was also dragged lower. Separately, the final reading of UK 2Q GDP was released overnight, steady at 3.2%y/y. UK house price data was also released, showing a 0.2%m/m decline in September. This took the annual rate of growth down to 9.4%, from 11.0%. The GBP/USD sits slightly lower, at 1.6210 this morning.
Early this morning, US September data releases were on the lower side of expectations (Chicago PMI, 60.5 vs. 62.0 exp. Consumer confidence 86.0 vs. 92.5 expected). The USD index has subsided form intra-night highs to sit around 85.90 at present.
Meanwhile the USD/JPY continues to inch toward the 110.00 level. It touched above 109.80 overnight, before easing off to 109.60 this morning.
The AUD/USD sits a little higher this morning, at 0.8740, as we approach some key data releases today. AU August retail sales are due. Our NAB colleagues expect a soft result of 0.1%m/m (consensus 0.4%), consistent with current poor levels of consumer confidence. AU house price data are also due. Finally, the release of the September China manufacturing PMI today (2pm NZT) will also be important for the AUD. Consensus expects this to remain in expansion, at 51.0.
Tonight PMI data will be released in the UK, EU and US.
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