Dairy auction results halt the NZD's upward track; USD weaker, euro stronger, yen likes snap election call, Aussies expect further falls

By Kymberly Martin

NZ Dollar

The NZD/USD sits at 0.7940, having fallen from intra-night highs above 0.7970.

Mimicking the previous night’s trading, the NZD/USD was on the ascendancy yesterday evening. It pushed above 0.7970 ahead of the GDT dairy auction early this morning.

The auction showed average prices down 3.1% from the previous event a fortnight ago. This was disappointing for those looking for further signs of stabilisation following recent tentative indications. The NZD/USD gapped sharply lower on the result, before finding its feet and consolidating above 0.7930.

There were chunky moves on most of the crosses overnight. The NZD/JPY pushed briefly above 93.20, before Japanese developments and the dairy auction result brought it back down to earth. It trades around 92.70 this morning.

The NZD/EUR took a sharp step down on the results of the German ZEW survey. Having then grappled its way higher, it was dealt another blow after the GDT auction. The NZD/EUR now trades just above 0.6330.

The NZD/AUD stepped higher last night as RBA Governor Stevens spoke of expectations for further falls in the AUD, at a scheduled dinner address. It traded above 0.9140 in the early hours of this morning before succumbing to the result s of the dairy auction. The NZD/AUD now trades around 0.9100.

With no significant data events on the local agenda today, all eyes will be on the release of the US Federal Reserve Minutes in the early hours of tomorrow morning. If these prove sufficient to jolt the USD out of its current consolidation phase, the NZD would be an obvious casualty.

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Majors

The USD was broadly weaker overnight, with European currencies leading the gains.

It was a busy night for currencies, but the enduring theme was a weaker USD. The EUR was on the ascendancy from early in the evening, but this was compounded by the release of the German November ZEW survey of the economy. This came in well above expectation with the current situation reading at 3.3 (1.7 expected) and expectations at 11.5 (0.5 expected). The EUR/USD has pushed up to trade at 1.2540 this morning.

Soon after, Japan PM Abe confirmed he was to postpone the Government’s proposed sales-tax hike and was calling a snap election. Parliament would be dissolved on 21 Nov but no specific date was given for the election. The JPY suffered a bout of volatility on the announcement, although not unexpected by the market. The JPY strengthened after the announcement and ultimately the USD/JPY has come to trade around 116.80 this morning. It once again failed in a bid to break convincingly through 117.00.

Yesterday’s RBA Minutes provided little to surprise to markets. Comments by BRA Governor Stevens at a dinner last evening summed up common themes. He saw rates on hold for an extended period; he was more concerned about downside than upside risk to growth; a lower currency would help balance growth; and that he sees a “pretty material risk” the currency will fall further. The AUD/USD touched intra-night lows below 0.8690 but has since recovered to trade at 0.8730.

This evening the Bank of Japan is due to release its Monetary Policy Statement and the Bank of England its Minutes. In the early hours of tomorrow morning, all eyes will be on the release of the US Federal Reserve Minutes. The market has shown itself to be more inclined to react to hard data than official commentary. Still, any hints from the Minutes that the committee sees labour market slack reducing or inflationary pressures rising could tempt a resumption of USD strength.

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