By Kymberly Martin
As the USD pushed higher overnight the NZD has been one of the only major currencies to hold its own. The ‘safe haven’ CHF has been the key underperformer.
China trade numbers, released yesterday afternoon, showed improvement. In USD terms, exports rose 11.5% y/y compared to a 25% fall in Feb. Imports fell 7.6% y/y compared to a 13.8% fall in Feb. This appeared to set a better tone for risk sentiment. Following gains in Asian equity markets the Euro Stoxx 50 closed up 3.3%, led by financials and commodities sectors.
In this environment of improved risk sentiment it was not surprising to see the ‘safe haven’ CHF under pressure. It has declined more than 1% against the USD. The JPY has also extended yesterday’s losses. The USD/JPY now trades at 109.30.
The USD was broadly stronger overnight, particularly against European currencies. The USD seemed little bothered by a disappointing US retail sales release for March. Easter distortions mean the data may not have been as soft as they looked. The USD index sits about 0.8% higher than this time yesterday morning.
Meanwhile the EUR/USD and GBP/USD have traded steady downward paths to 1.1280 and 1.4210 respectively. The Bank of England’s meeting will be the focus for the GBP this evening.
However, the better market mood is not causing the market to get too carried away with bringing the US Fed back into the picture. It still only prices around a 50% chance of one 25bps FFR hike by year-end.
Tonight’s US CPI release will be the latest piece of data shedding light on the inflation side of the Fed’s dual mandate.
There was some harsh volatility in the CAD around the Bank of Canada’s announcement early this morning. The Bank left its cash rate unchanged at 0.5%, as expected, but its accompanying forecast revisions provided something for everyone. Ultimately the USD/CAD has returned to pre-meeting levels around 1.2800.
The AUD was unable to resist the stronger USD. From yesterday afternoon’s highs above 0.7710 the AUD/USD now trades at 0.7660.
The key driver of the AUD today will be the AU employment report. Our NAB colleagues have alerted us to the possibility of a very strong employment print, potentially distorted by sampling issues.
The NZD/USD also sits a bit below yesterday afternoon’s highs, but has managed to consolidate since last evening. It currently trades at 0.6920, similar to this time yesterday. The NZ TWI, at 73.20, is back near range highs. Its resilience, even when faced with a stronger USD will frustrate the RBNZ as it continues to fret about low imported inflation.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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