By Kymberly Martin
NZ Dollar
The NZD/USD has consolidated over the past 24-hours to trade around 0.7540 at present.
The release of the December BNZ Manufacturing PMI yesterday (up 2.1 points to 57.7) was consistent with broader indicators showing the economy is in good heart.
There is a lot to like with activity expanding at a solid clip with no inflation.
However, it is the “no inflation” that the market is currently focused on, especially in the wake of the surprise rate cut from the Bank of Canada on Wednesday night.
The NZD/USD was initially under further downward pressure during the day yesterday, but grappled its way back in the evening.
After a bit of volatility around the ECB’s announcement last night, the NZD/USD now trades around 0.7540. The next major line of support for the NZD/USD remains at the mid-2012 lows around 0.7460. Resistance is eyed at 0.7580.
On the crosses the most notable move was for the NZD/EUR. Following the ECB announcement it was spurred from around 0.6510 to its current trading level, just above 0.6600.
The NZD/AUD has continued to dribble lower and now trades at 0.9310. With the market currently focused on increasing expectations for a RBNZ rate cut, rate differentials are becoming less supportive of the cross.
The top of our ‘fair value’ trading range, of 0.9200, beckons, with aspirations of parity now fading.
However, there is a solid line of support seen around 0.9290. Today’s China PMI release may be the main influence on the cross today.
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Majors
Overnight, European currencies suffered losses while the AUD and JPY managed to hold their own relative to the USD.
Last night was the ECB’s moment. It managed not to disappoint expectations for it to announce a fairly chunky QE programme.
The announcement provided a bit of a boost to equities as our global risk appetite index inched up from 42 to 46%. The Euro Stoxx 50 closed up 1.6% while the S&P500 is currently up 0.6%.
The EUR/USD was an obvious casualty of the prospect of significant further monetary easing in the Eurozone. From around 1.1650 the EUR/USD fell to 1.1400, its lowest level since late-2003.
The GBP was also dragged down in sympathy, as were all other European currencies. The GBP/USD fell from above 1.5200 to sit around 1.5050 currently.
The further currencies lie from the epicentre of the Eurozone, the better was their performance overnight. Once we got as far as Australasia, the ripples from the ECB’s announcement were quite faint. The AUD/USD sits below its intra-night highs but still slightly higher than yesterday morning, at 0.8100. Today, an important release for sentiment toward the AUD will be the Jan China Manufacturing PMI (2.45pm NZT). Consensus expects this to show the sector is still marginally in contraction, with a reading of 49.5.
Tonight, Eurozone and US Manufacturing PMI data will also be released along with UK Retail Sales.
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