By Kymberly Martin
NZ Dollar
The NZD sits a little higher this morning around 0.7930.
The NZD/USD traded a very tight sideways path until the early hours of this morning, in the absence of any domestic data releases yesterday.
It was not until the USD fell sharply this morning that the NZD/USD was jolted higher. It reached toward 0.7960 before returning to trade around 0.7930 currently.
There was a fair amount of volatility on the NZD crosses overnight.
One of the more notable sustained moves was on the NZD/JPY. From 85.10 early this morning the cross now trades at 85.70.
The NZD/AUD softened last evening to reach intra-night lows around 0.8930 early this morning. It now trades just below 0.8960. Resistance is eyed at 0.8990.
Today the domestic focus will be the release of the ANZ business confidence index. We will take it as it comes but focus on three key areas: inflation gauges; headline confidence (any post-election bounce?) and activity outlook.
But this data will likely be a mere sideshow for the currency compared to the US FOMC meeting early tomorrow morning (7am NZT). That will broadly set the tone for the USD.
We see NZD/USD resistance in the region of 0.7970-0.7990. Support is eyed at 0.7860.
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Majors
As the USD index fell overnight, on the back of US data delivery, the AUD, CAD and NZD outperformed.
Late last evening the USD index was tracking higher. However, this move came to an abrupt end with the release of US Sept durable goods orders (-1.3%m/m vs 0.5% expected). Some of the fall was accounted for by a decline in commercial aircraft orders, but more broadly the data was undeniably weak. A later release showing US consumer confidence jumped to a seven-year high of 94.5 (87.0 expected) was unable to revive the USD. The USD index trades at 85.30 this morning.
Meanwhile equities have had a solid night on either side of the Atlantic. With around half of the S&P500 companies having reported for Q3, the aggregate positive earnings surprise sits at 4.9%. Earnings remain a fundamental support for equities, through the vagaries of market sentiment.
Overnight, the Riksbank of Sweden surprised consensus by cutting its interest rate 25 bps, to 0.0%. It stands as the latest in a line of Central Banks who have tried, but failed to sustain rate hikes, post the GFC. It raised rates from 0.25% to a peak of 2.00% in 2011, before later resorting to cutting again. The Swedish Kroner has fallen 0.40% against the USD over the past 24-hours, to be the weakest performing currency.
Elsewhere, most other majors popped higher on the durable goods orders-inspired fall in the USD. The AUD, CAD and NZD were the main beneficiaries. The ‘risks-sensitive’ currencies were also assisted by the general improvement in risk appetite overnight. Our global risk appetite index (scale 0-100%) now trades above 58%, from lows of 32% a fortnight ago.
The AUD/USD, that was tracking higher from yesterday afternoon, briefly popped above 0.8880 as the USD fell. It later subsided to trade at 0.8850 currently.
Today, markets may be a little subdued ahead of the US FOMC meeting in the early hours of tomorrow morning (7am NZT). Removal of the Fed’s “considerable time” language would likely see a knee-jerk surge in the USD. However, our central case is the Fed maintains the language until the December meeting. UK mortgage approvals for September are also due this evening.
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