Locals will be returning to the office after the long weekend seeing the NZD 1.5% higher compared to Friday afternoon, reflecting the dive in the USD after the surprising non-farm payrolls report early Saturday morning.
The US employment report was a shocker, with non-farm payrolls of 38k for May significantly undershooting market expectations and downward revisions to previous months. That one number effectively ruled out the Fed hiking in June and seriously diminished the chances of a July hike as well. The USD promptly fell, with the major currency TWI down 1.6%. A softer than expected non-manufacturing ISM figure added to the bearish USD tone.
NZD/USD shot up by more than a cent, reaching a high of 0.6965 and breaking out of what has been a fairly tight trading range over the past month. The twin peaks of 0.7054 of late April and early May are now under threat if this week’s RBNZ MPS is more hawkish than expected and/or if the USD comes under further selling pressure.
Currency markets have settled over the past trading session. The focus was on Chair Yellen’s speech this morning and her comments came as no surprise. She still thinks that policy will need to tighten gradually over time, but she backed away from her previous guidance that a rate increase would likely be appropriate over coming months.
NZD/USD is currently trading around 0.6930, while NZD/AUD is around 0.9400 and down a touch since late Friday afternoon.
GBP has been the other big currency mover since Friday afternoon. A couple of recent polls on the upcoming referendum put the “Leave” camp ahead of “Remain”. Thus, while GBP rocketed ahead after the US employment report, it gave up those gains after the polls were published. It has traded in a wide 1.4350-1.4580 range. NZD/GBP currently sits just under the 0.48 mark.
With much of the currency action reflecting idiosyncratic USD and GBP forces, locals will find NZD/JPY and NZD/EUR crosses not too much different from when they left the office on Friday – NZD/EUR a touch weaker at 0.6100 and NZD/JPY a touch stronger at 74.40.
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