By Kymberly Martin
NZ Dollar
The NZD/USD has declined to trade around 0.7800 currently.
Yesterday’s release of the RBNZ’s inflation expectations survey confirmed expectations remain contained. This provides little impediment to the RBNZ staying on hold for a prolonged period.
The NZD/USD continued to subside for most of the day, attempting to break through support around the 0.7800 level overnight. It remains at this level this morning.
A break lower would bring the early-Nov lows at 0.7660 into sight. Resistance is now eyed around 0.7840.
The NZD is weaker on most of the crosses, with the exception of the NZD/AUD.
In the backdrop of a rebounding EUR the NZD/EUR has fallen sharply to trade around 0.6260 currently. Equally, the NZD/GBP has pushed lower to sit around 0.4960. An array of UK data releases (see Majors) may set the tone for this cross this evening.
The NZD/JPY has had quite a striking fall as the upward momentum in the USD/JPY has faded for now. From 93.00 yesterday afternoon, the NZD/JPY now trades just above 92.00. We believe this cross is looking quite toppy at these levels and expect trading back into the high 80s in coming months, as the NZD/USD weakens alongside further JPY weakness.
Meanwhile the NZD/AUD has continued to strengthen. From intra-night lows around 0.9100 it now trades at 0.9150. Comments from RBA Deputy Governor Lowe overnight provided the AUD with no favours. The NZD/AUD is now at the very top of its trading range of the past four months.
Today, the RBNZ will release its LVR ratio data for October.
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Majors
The AUD and NZD have underperformed over the past 24-hours while the JPY and EUR have strengthened.
Overnight, equity markets were flat to modestly higher on both sides of the Atlantic. Our global risk appetite index (scale 0-100%) remains at a fairly healthy 69%.
Meanwhile WTI oil price futures have fallen 1.4% overnight, back toward their lows.
In currencies, the EUR glided through an array of Q3 German data releases that provided no major surprises. Q3 GDP was confirmed at just 0.1%q/q (1.2%y/y). Early this morning the EUR/USD tried and failed to break below support at 1.2400 (lows since Aug 2012). After this failed attempt it snapped higher to trade around 1.2460 currently. The USD index was driven lower in the process. The USD index trades around 87.90 at present.
The AUD continued its slide yesterday. The RBA Deputy Governor’s speech overnight was mostly related to longer-term themes so was not particularly market moving. However, he did manage to slip in that the Bank still believes the AUD is too high. This likely helped the AUD in its break through key support levels early this morning. The AUD/USD now trades just above 0.8520, its lowest level since early-July 2010.
Today’s AU data focus will be Q3 construction work done. Our NAB colleagues expect a further decline in engineering construction to overshadow resilience in residential investment. They pick a 2.5% real net decline (consensus -1.9%q/q)
There is a plethora of UK and US data releases tonight. These include UK Q3 GDP and UK Nov CBI retail sales. US data include Oct durable goods orders and PCE deflator (the Fed’s preferred inflation measure), the Nov Chicago PMI and October pending home sales. All sufficient to provide a bit of volatility in the USD ahead of the Thanksgiving holiday tomorrow, which may mean quieter trading into the week end.
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