Three currencies stood out on Friday, with the NZD, CAD and GBP all under pressure, while other currencies showed modest movement.
The NZD closed the week on a soft note, falling steadily throughout the Friday session and closing down 1% to 0.7240. This was just below the level it started last week and just above our short-term model fair value estimate of 0.7170. There were no data releases to drive the move, it seemed to reflect a further response to the RBNZ’s more dovish-than-expected Statement on Thursday morning, which helped drive further falls in interest rates across the curve as well.
NZD/AUD has seen some strong downward movement over recent days and closed the week almost bang on 0.95, after reaching as high as 0.9770 mid-month. At that level the cross was over-bought and outside our projected range for the next year of 0.93-0.96 and above our two short-term model estimates of 0.9220 and 0.9540. The fall should be seen in that context and the cross has been well overdue for a period of consolidation.
CAD underperformed, falling 1% after core CPI inflation data came in below expectations at 1.8% y/y, the weakest in 2 years. USD/CAD closed the week at 1.3170, regaining the losses seen in the post-FOMC aftermath.
GBP was down 0.9% to 1.2970 after indications that the UK might leave the EU sooner than many have assumed. British foreign secretary Boris Johnson told Sky News on Thursday that the UK plans to trigger Article 50 in early 2017 and suggested the country’s exit from the EU could take less than two years.
EUR/USD managed to hold its ground, up a touch to 1.1230, with no spillover from the weaker GBP, and investors not overly perturbed by the soft Germany services PMI, which dragged down the overall indicator for the Eurozone.
USD/JPY spent much of Friday oscillating around the 101 mark, surviving another week without closing below the 100 mark, although we think that support at that level will eventually wane.
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