Most major currencies are relatively close to the levels prevailing yesterday morning, with the notable exception of AUD, which is sharply lower.
The USD had a mixed evening, but is effectively flat for the day at an index level.
EUR has not materially reacted to the news that Greece has ‘bundled’ its June IMF payments to come due at month’s end.
The AUD is 1.3% weaker for the day. At 0.7690, it has given up nearly all of the gains it made following Tuesday’s stellar Q1 GDP report. Both retail sales and trade made soft starts to Q2, with April reports both disappointing expectations. With regard to retail sales, our NAB colleagues point to tentative consumer sentiment ahead of the Federal Budget in May. The trade balance, which was the worst on record, was partly driven by temporary (weather-related) disruptions to coal exports.
In Europe, the main news of the evening was Greece’s request to the IMF that it ‘bundle’ the repayments it is due to make in June. The IMF granted this request, which means that the €1.5 bln that Greece owes to the institution will now come due on 30 June.
While this request was always technically possible, it comes as a surprise to most. Indeed, IMF chief Lagarde herself had said that bundling did not appear on the cards, just hours before the request was made. We take the request a modest negative, as it suggests Greece and its creditors are still some distance from an agreement, despite much rhetoric (mostly from Greek officials) that such an agreement was ‘near’. Overnight, Greece formally rejected the proposal put forward by the creditors this week.
For markets, the proverbial can has been kicked down the road toward the end of the month, with attention likely to return to US events like tonight’s employment report and the 18 June FOMC meeting.
NZD/USD has been dragged lower largely thanks to the AUD’s woeful performance, but found support just above 0.71. The NZD/AUD cross surged back above 0.92, and looked to test 0.93 before fading back. We remain content with forecast of 0.95 for 2015, on the basis that the RBNZ does not cut interest rates.
Tonight, all eyes turn to the US employment reports. While the consensus picks a 225k gain, we suspect the market is readying itself for a better result than that. Much scrutiny will also fall on the wage growth numbers, which remain relatively subdued.
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Raiko Shareef is on the BNZ Research team. All its research is available here.
2 Comments
A surprise is something that was not expected to happen, not something that everyone knew was going to happen. A surprise would be that Germany leave the Euro at the same time as Greece, thus taking the extremes out of the income/wealth distribution of the Euro members. Greeces currency falls and they can rebuild, Germanys increases and the Euro falls effectively ending the subsidy from the rest of the Euro members to Germany.
The BNZ, Raiko's employer, thinks the OCR will still be at 3.5% at year end, and therefore the NZD AUD cross rate at 95 cents at year end. The BNZ no doubt talks to the RBNZ more than I do, and may have some justification based on that for no OCR cuts. The ANZ though think there will be two OCR cuts in the next two months. The ANZ's view would seem consistent with the RBNZ targets, and even their recent rhetoric. Relevant data seems to have got worse in the last month. I am therefore intrigued how the BNZ is holding on to a "no cut" view.
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