Danes defend euro peg, cut rates to align with euro. But NZD will be more influenced by Chinese GDP result later today

By Kymberly Martin

NZ Dollar

After dipping as low as 0.7750 at the end of last week, the NZD/USD clawed its way a little higher.

From the start of the week it has traded a relatively tight range, sitting around 0.7780 currently.

After the heightened volatility surrounding the Swiss National Bank decision at the end of last week, the NZD/USD has returned to more pedestrian trading.

With the US celebrating a public holiday, and Wellington out for its anniversary day, there was little notable action in the NZD/USD. From intra-night highs above 0.7800, it now trades at 0.7780.

The broad trading range of the past four months for the NZD/USD (0.7600-0.8000) remains firmly intact.

When the range is finally broken, we believe it is likely to be to the downside.

For today however, domestic data in the form of the Q4 Quarterly Survey of Business Opinion (QSBO), will likely serve as a reminder the NZ economy remains robust despite depressed inflation readings.

On the crosses, the NZD has weakened slightly against a stronger EUR at the start of the week. The NZD/EUR sits just below 0.6700. However, the key challenge for this cross will likely be Thursday’s ECB meeting.

The NZD/AUD has traded a fairly tight range at the start of the week to sit around 0.9470 currently.

A key test for the cross will be the release of China data this afternoon. Any positive surprises would likely benefit the AUD over the NZD and vice versa.

To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.

----------------------------------------------------------

Majors

The CHF and the JPY have been the weakest performers over the past couple of days trading. The EUR has pushed a little higher at the start of the week.

After the shock and awe of last week’s surprise moves by the SNB, this week has started on a calmer footing, as the US celebrated Martin Luther King Day.

Our global risk appetite index (scale 0-100%) remains at a still fairly tentative 37%. However, there have been modest gains in most equity markets, despite the WTI oil price being down 2.4% as we speak.

The Danish Central Bank cut its lending rate overnight from 0.2% to 0.05%, and its deposit rate from -0.05% to -0.2%, leaving both in line with ECB equivalents.

Since the SNB move last week there has been increased speculation the Danish Bank could break its 30-year peg to the EUR. However, the pressures are not nearly so great, given the Danish Krone (DKK) is not perceived as a “safe haven” in the way the CHF is.

Overnight, the DKK pushed higher with the EUR/USD. The EUR/USD now sits at 1.1620.

Meanwhile, the CHF continues its modest declines following its vertical ascent late last week. The CHF has lost 2% relative to the USD since the start of the week. The USD/CHF trades at 0.8770 this morning.

The AUD will be in the spotlight as China releases a load of data this afternoon, including Q4 GDP. Consensus expects 7.2%y/y, a smidge down from previous (7.3%). Ahead of the release the AUD/USD is trading around 0.8210.

The German ZEW survey of the economy is due tonight, along with the US NAHB housing market index (both for Jan).

However, the market will be looking ahead to the main event of the week, the ECB meeting on Thursday.

The pressure is now on the ECB to over-deliver in its announcement of detailed QE plans, in order that its offerings are not perceived as a ‘disappointment’.

All its research is available here.