The USD closed lower on Friday night after a trifecta of disappointing US data.
On Friday night, the USD traded higher until the release of an array of US data that came in below expectation.
Data covered both the manufacturing and consumer sectors. The soft April industrial production data reflected a fall in utilities output after the earlier weather-related boost, plus a sharp decline in oil and gas drilling (based on lower oil prices).
It is disappointing for those looking for firmer data in Q2, in order that the soft Q1 can be relegated to the basket of winter-weather distortions. The USD index fell from above 94.00 to end the week at 93.10.
The EUR/USD was a key beneficiary. Having slumped earlier in the evening it was boosted after the USD data releases. From intra-night lows below 1.1330 the EUR/USD traded up to 1.1450.
The AUD/USD was generally on the back-foot for most of Friday’s trading. It popped higher after the US data releases but was unable to hold onto all of its gains. It ended the week at 0.8030. However, CFTC FX data released on Friday showed speculative long positions in AUD, though modest, now exceed those for NZD. The position for AUD now stands at 4.5k while the long NZD position has reduced form 9.1k to 1.8k.
The NZD/USD also drifted lower for much of Friday. It bolted higher early on Saturday morning after the US data releases and managed to hold onto a good portion of its gains. The NZD/USD ended the week at 0.7470. Near-term support remains at 0.7420, while resistance is seen around 0.7560.
The NZD was notably weaker against the EUR on Friday night. It ended the night close to its lows, around 0.6530. This is a fraction above the 200-day moving average of 0.6510. It is also the crosses lowest level since mid-February. This is at the lower end of the mid-to high 0.60s range we see sustaining for the rest of the year.
Today’s NZ PSI will likely show the sector remains firmly in expansion (i.e. above 50) but the key will be whether it follows the PMI lower in April
The more critical domestic events for the currency will occur later in the week. Tomorrow’s RBNZ survey of inflation expectations and Wed morning’s GDT dairy auction will likely be closely watched.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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