By Kymberly Martin
While the USD index has consolidated its recent gain, the JPY has continued to underperform. The GBP fared badly overnight while the NOK and CAD have outperformed.
Overnight, markets were pretty steady. Equities provided modest positive returns on either side of the Atlantic.
Within commodities the WTI oil price enjoyed a 4.7% rebound, as OPEC members were said to be making a final diplomatic push to curb production. Oil-linked currencies, CAD and NOK were beneficiaries. The CAD has gained around 0.7% versus the USD since this time yesterday. The USD/CAD now trades at 1.3470.
US data releases overnight (retail sales, Empire manufacturing index) were above expectation, helping support an already fairly buoyant USD. By contrast, the GBP/USD gapped lower on the release of UK CPI data. At 1.2%y/y, October core CPI inflation had dipped from the previous month and was some way below expectation. The move may have been distorted by one-off factors and prove temporary, as the post-‘Brexit’ plunge in the GBP starts to feed through to higher imported inflation. Overnight, the GBP was one of the worst performing currencies. From 1.2500, it now trades at 1.2420.
Meanwhile the JPY has continued its decline against the USD. ‘Safe haven’ demand for the JPY has been dampened for now. Widening in US-JP interest rate differentials in recent days has also undermined the currency. From late-evening lows below 107.80 the USD/JPY now trades at 108.90. This is its highest level since early-June.
The NZD/USD touched highs early-afternoon and has since traded a bit of a jolting path lower. The latest GDT dairy auction, held in the early hours of this morning, showed an average price gain of 4.5%. Following on from recent strong price rises, this additional gain will support an outlook for the milk price of at least NZD6 per kilo. The NZD/USD currently trades at 0.7100, a little above its early morning lows. Near-term support remains at the 200-day moving average at 0.7020.
The NZD/AUD has sidled a little lower over the past 24-hours to now trade at 0.9400. Our forecasts anticipate consolidation in the mid-90s in coming months. Support is eyed on any dip toward the range-low just below 0.9300. Near-term resistance is likely to be encountered on a move up to 0.9460.
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