By Raiko Shareef
NZ Dollar
NZD finished Friday very little changed from where it opened, sitting mid-pack amongst winners and losers against the USD.
NZD/USD closed 0.1% lower at 0.7260.
Local building permits and migration data, though strong at heart were roundly ignored.
We suspect this treatment of activity data will continue at least until Governor Wheeler’s high-profile speech on Wednesday.
Taking the unusual step of organising a media lock-up, the RBNZ looks to be effectively treating that speech as a direct follow-up to last week’s OCR Review.
With that the case, we pick NZD to remain heavy heading into Wednesday afternoon, whatever the outcome of that morning's dairy auction and employment reports (we are biased to the high side for both).
There are no local data releases today. We pick a 0.7210 – 0.7300 range for NZD/USD.
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Majors
A softer-than-expected US GDP report failed to materially take the shine of the USD. A sharp rise in oil prices benefitted NOK, but failed to inspire CAD, which was knocked by a weak GDP print. EUR eased lower as Greek rhetoric waxed on Friday, but waned over the weekend.
The US economy grew at a 2.6% seasonally-adjusted annualised rate in Q4, marginally softer than the +3.0% expected, and down from Q3’s blinding +5.0%.
Amongst the positives, personal consumption beat expectations at +4.3%, its strongest quarter since 2006.
On the other hand, a sharp rise in inventories (which contributed a full 0.8% of overall GDP) looks at risk of being a drag come Q1. On inflation, the Fed’s preferred core PCE measure rose by 1.1%, as expected. The broad Bloomberg Dollar Spot Index closed 0.2% higher for the day.
Four out of four Fed speakers who delivered comments on Friday were upbeat on the US economy, and failed to dampen the prospect of rate hikes in 2015. To be fair, Messrs Bullard, Fisher, Williams and Plosser occupy the neutral to hawkish bands of the FOMC’s spectrum of biases.
For ours, the most interesting comment came from (as it so often does) from Richard Fisher, the outgoing president of the Dallas Fed. He argued that dollar dollar strength was positive for job creation, suggesting it would encourage US corporations, bemoaning the impact on earnings of dollar strength, to bring more jobs back onshore.
Elsewhere, European investors were understandably disturbed by the new Greek finance minister characterising the troika as “a committee built on rotten foundations”, and stating that he refused to co-operate with it. Greek Prime Minister Tsipras issued a statement over the weekend in an attempt to soothe tensions. All up, EUR fell just 0.2% to 1.1290.
In commodities, oil prices gained sharply late in the session. News of further US rig shut-downs certainly helped, but we suspect the greater force was month-end exiting of short positions. As such, we are wary that Friday’s gains could be reversed somewhat. WTI gained 8.3% to $48.24, while Brent gained 7.86% to $52.99.
This week, the highlights for us will be the RBA’s policy statement on Tuesday afternoon, and the US employment reports on Friday. Today, the closely-watched US ISM manufacturing index will be the key data point, alongside final January readings for Chinese and European PMIs.
Other news:
* Eurozone headline inflation -0.6% y/y vs -0.5% exp.
* Canada GDP -0.2% m/m vs 0.0% exp.
* China official manufacturing PMI 49.8 vs 50.2 exp.
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