By Kymberly Martin
The JPY has been amongst the strongest performers and the GBP the weakest over the past 24-hours. Despite climbing a little higher overnight, the NZD/USD now trades at a similar level to yesterday morning.
The GBP continues to trade a volatile path dictated by UK referendum polls. A couple of polls released by ICM in the early hours of this morning showed ‘Leave’ ahead by 5 percentage points. Meanwhile betting sites still favour ‘Remain’ by a large margin. The GBP/USD traded a spiky 1.5% range overnight. It now trades at 1.4210.
Recall, in late February when ‘Brexit’ fears were heightened, the GBP/USD traded down to lows of 1.3840. It seems fairly certain the GBP has plenty further capacity to fall if a ‘Brexit’ vote prevails next week. Equally, a knee-jerk relief jump will occur on a ‘Bremain’ result.
The USD was a bit weaker overnight, with both the EUR and JPY making gains. The USD/JPY has slipped to trade just above 106.00 currently. Overnight, it traded close to its early-May lows, near 105.60, its lowest level since October 2014. Uncertainty surrounding the UK referendum is fertile ground for further strength in the ‘safe haven’ JPY.
Yesterday afternoon’s China data releases passed without too much impact on markets. The NZD and AUD have subsequently traded similar paths. Both traded ‘M’ shaped patterns overnight. The NZD/USD found resistance around 0.7080 on a couple of occasions before returning to trade at 0.7050 currently.
On the crosses, upward momentum in the NZD/AUD and NZD/EUR has faltered. The NZD/AUD now trades a little lower, at 0.9530. We continue to see fundamental ‘fair value’ in the low, rather than high 90s. Thursday has the greatest potential for local factors to impact on this cross. The early morning GDT dairy auction will be followed by the release of NZ Q1 GDP and later the AU employment report. Expect some volatility.
Overnight, the NZD/GBP briefly poked its head above the 0.5000 level for the first time since April last year. However, the move was not sustained and the cross now trades at 0.4950.
Next week’s UK referendum results will likely determine if the re-ascent of the NZD/GBP proves a brief hoorah or a more enduring phenomenon.
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