The NZD is one of the strongest currencies, with a boost post the RBNZ’s Financial Stability Review (FSR) and broadly based USD weakness.
Risk sentiment is weaker overnight, with some poor earnings results for consumer discretionary stocks in the US driving the S&P500 down 0.7% at the time of writing and European bourses down by a similar amount.
After a strong recovery over the past six days, the USD has weakened, with the DXY index down about 0.5%, likely driven by some profit-taking, with no US economic releases of note.
Commodity currencies have been supported by a 3-4% rebound in oil prices, with lower than expected US crude inventory data and lower US production the key drivers.
Despite lower risk appetite, the NZD heads the leaderboard. The NZD jumped 60pips on the release of the RBNZ’s FSR, where no new macro prudential measures were announced.
While most didn’t expect any fresh measures, the previous day the market sold the NZD after a published interview with the Finance Minister raised the chance of measures being introduced. We saw the spike up in the NZD as an unwinding of that selling.
The NZD would have likely risen even further had the Bank not indicated that further macro-prudential measures were in its sights, although it was an open-ended suggestion with no timetable in mind.
The NZD consolidated those gains overnight and trades this morning at 0.6830, up over 1% for the day overall. The AUD is up 0.2% to 0.7380, helped by the weaker USD tone and lift in oil prices. NZD/AUD trades around 0.9250, up from the 0.9180 mark before the FSR.
Of the other majors, JPY has strengthened after a soft run over recent days and USD/JPY trades down 0.7% at 108.50. EUR/USD is up 0.5% to trade back above the 1.14 handle.
Amidst the USD sell-off, GBP made little headway. UK industrial production undershot expectations and the soft data confirms that the economy has hit a bit of a hole ahead of the June referendum on EU membership, no doubt reflecting the uncertain future at this juncture.
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