By Kymberly Martin
Broad USD weakness was last night’s theme. The NOK was the top performer, amongst the majors, by some margin.
The USD weakened substantially against all of its major peers and all but a couple of its emerging market counterparts overnight.
The overall outperformer was the Russian Ruble, gaining a further 2.6% against the USD, assisted by the further 3.0% rebound in the WTI oil price. The NOK also benefitted from the oil price moves.
The proximate cause of an early morning plunge in the USD was the release of US March US retail sales data. It disappointed lofty expectations. This was despite a 0.9% gain in the month which suggests much of the previous month’s weakness can be put down to the coldest winter on record in the US Northeast. An undershoot in the US NFIB small business optimism survey soon after, did not help the mood. From 99.60 the USD index touched intra-night lows below 98.40 before returning to trade at 98.70 currently.
The EUR/USD was a key beneficiary. The currency had shown little response early in the evening to a positive surprise in Eurozone industrial production data. The data shows the region’s industrial sector is starting to feel the benefits of a weaker EUR and lower oil prices. However, the EUR/USD popped higher after the US retail sales data. From 1.0560 the EUR/USD now trades at 1.0660.
The GBP/USD initially fell last evening after UK CPI data confirmed headline inflation was flat on a year ago in March, and even core was lower than expected at 1.0y/y. This plays to the market’s pricing of just a 50% chance the BoE’s cash rate will be higher by mid next year. But later the currency was boosted by the broad-based fall in the USD. The GBP/USD trades at 1.4780 this morning.
NZD/USD traded a fairly tight range for most of yesterday but was spurred higher by the US retail sales data. From 0.7440 the NZD/USD quickly found itself above 0.7500. It now trades at 0.7520.
The NZD was also boosted against the AUD. From 0.9830, the NZD/AUD now trades at 0.9860. There is plenty to provide volatility in the cross over the coming couple of days.
Today’s early-afternoon China data-dump will help set the broad market mood and particularly sentiment toward the AUD. The market will be sensitive to any signs of China weakness after the disappointing China trade data earlier this week.
Then in the early hours of tomorrow morning we receive the results of the latest GDT dairy auction. We expect a subdued result even after the -11% fall in average prices at the last event. This could cause the NZD/USD to give up some of its post-retail-sales-gains. And don’t forget today’s speech by RBNZ’s Deputy Governor on the NZ housing market. This will be particularly relevant in the light of yesterday’s storming REINZ nationwide house price data.
Finally, tomorrow also brings the key AU data release of the week, the March employment report. Hold on for some rocky trading in the NZD/AUD overall in the next couple of days. However, it would likely take some harsh China/AU data disappointments to inspire a re-attempt at NZD/AUD parity this week. Near-term NZD/AUD support remains just below 0.9800.
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