The USD has strengthened slightly since the start of the week. The NZD has been one of the weakest performers.
As some positive noises emanated from Greek emergency negotiations overnight there were some large moves in bond and equity markets.
The Euro-Stoxx 50 closed up 4.0% while German bond yields rose 13bps. However, currency market moves were much more subdued.
Trading in the EUR was surprisingly range-bound overnight, between 1.1320 and 1.1410. It sits around 1.1350 at present.
There remains a lot of water to go under the bridge before any final deal with Greece is signed, though officials, at least publically, are starting to sound more hopeful.
The JPY has joined the NZD in being of the poorest performers since the start of the week.
The June monthly economic report from the Bank of Japan started with the line “Japan’s economy has continued to recover moderately”, for the second consecutive month. We continue to see a softening medium-term trend in the JPY, and see USD/JPY back at 125 at year-end. It trades at 123.40 this morning.
The NZD/USD and AUD/USD have both slipped a little further since the start of the week.
The NZD/USD attempted to rebound early last evening but was curtailed at the 0.6930 level. Later on, while most attention was on the Eurozone, the NZD/USD has quietly drifted lower. It is now flirting with 0.6870, its lowest level since July 2010.
In the absence of domestic data releases today, offshore developments will remain the main the driver of sentiment.
The release of the June China manufacturing PMI has potential to impact on the broad market mood and particularly sentiment toward the AUD.
This evening, the release of Eurozone and US PMI data, and a smattering of other US data releases, may well be drowned out by further headlines from continued Greek negotiations.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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