After Friday’s choppy session post the BoJ surprise easing, markets are much calmer, with more modest movements. There’s a mild risk-off tone, although amidst that the NZD has performed relatively well.
Summarising the key data releases first, China’s run of weak data continued, with the official PMI index falling to its lowest level since August 2012 and slightly undershooting market expectations.
The US ISM manufacturing index was flat at 48.2, compared to expectations for a small rise. The components were mixed, with the new orders component rising, which some saw as heartening, but the employment index fell to its lowest since June 2009.
Personal income and spending showed changes of +0.3% m/m and flat respectively, driving the savings rate to a 3-year high. Construction spending undershot expectations.
In all, the theme of US data undershooting expectations continued, evidenced by Citigroup’s economic surprise index falling to -50.50, an 8-month low.
The only positive economic news came in the UK, with a better-than-expected PMI reading and further gains in mortgage approvals.
European equities were down slightly and the S&P500 is currently down 0.6%. Oil prices are down circa 5-6%, but this follows the strong rebound towards the end of January. Brent crude is trading at $34.20. Despite both oil prices and equities being down, looking at intra-day movements between crude and S&P500 futures, the link appears to have broken.
GBP heads the currency leaderboard, up 1.0% to 1.4385, boosted by the mentioned economic data. The euro is up 0.6% to 1.0892 and other European currencies are also up against the USD.
The NZD has performed relatively well, given the risk off move, up 0.3% to 0.6505. This seems to reflect portfolio flows, than fundamentals.
The NZD was the weakest major currency in January, falling by 5.1% so today’s outperformance should be seen in that context. We expect some consolidation around current levels. Our fair value estimate has risen a cent to 0.63, following the improvement in risk appetite last week.
The AUD is down 0.1% to 0.7076, so NZD/AUD is up 0.4% to 0.9188. This cross remains a favourite one for traders to play, and there might be some profit taking on short NZD positions placed earlier in the year.
After the shock move on Friday by the BoJ, the Yen has settled into a tight trading range over the past 24 hours. USD/JPY is currently around the 121 handle, about the middle of that range.
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