Greek PM breaking election promise to end austerity; AUD stronger on better Chinese manufacturing data; NZD continues downward trend

By Kymberly Martin

The USD strengthened overnight, particularly against its European peers. The NZD/USD sits a little lower, at 0.6840, this morning.

The USD was on the ascendancy from early yesterday afternoon.

It may have been that a relative lull in the Greek negotiations allowed the market to return its focus to relative monetary policy, where it seems the US Fed will be one of few Central Banks to be raising rates this year.

This assumption was also helped by comments from Fed member, Powell, in the early hours of this morning. The market may also be concerned that after its start-of-week optimism, a final deal for Greece may yet prove difficult.

In this regard, news overnight was a bit mixed. European leaders have given the Greek PM 48-hours to detail a plan acceptable to creditors that could then be signed by the end of the week.

The difficult part may now be for PM Tsipras to sell details of any deal to his own party. There were signs of dissent from party members who feel that Greece has given away too much in the negotiations, breaking its election promise to end austerity.

The EUR has declined steadily over the past 24-hours to sit 1.6% lower relative to the USD this morning, at 1.1160.

The GBP was also on the back-foot overnight, in the backdrop of broad USD strength. Downward momentum was likely also assisted by a disappointing UK CBI survey of total orders in industry. The GBP/USD trades at 1.5710 this morning.

The AUD has outperformed most of its peers over the past 24-hours, managing to hold its own relative to the strong USD. 

The currency showed a very brief relief spike when the China HSBC manufacturing PMI came in slightly above expectations, at 49.6 (though still representing that activity in the sector is contracting). The AUD/USD trades at 0.7720 currently.

The NZD/USD has continued to drift lower over the past 24-hours. It reached intra-night lows below 0.6820 as the USD index hit its highs in the early hours of this morning. It now trades around 0.6840.

However, the NZD made steady gains against its European peers overnight. From 0.6080 last evening the NZD/EUR now trades at 0.6130.

This may reflect fading optimism on a Greek deal. Or is may simply reflect the realisation that once Greece fades from headlines, attention will return to the outlook for relative growth and interest rates, where NZ still outshines the Eurozone.

The NZD/GBP enjoyed a bit of a step higher in the early hours of this morning. The cross found support at the Nov-2009 lows around 0.4330 before rebounding to trade at 0.4350 this morning.

It is empty on the domestic calendar today, so we may see some consolidation in the NZD ahead of the latest reading of US 1Q GDP this evening, and potentially more Greek-related headlines.

Kymberly Martin is on the BNZ Research team. All its research is available here.