It has been something of a risk off night in markets, although not universally evident in currency markets.
Equity markets are a sea of red on both sides of the Atlantic. Euro Stoxx 50 closed down 1.2%, and while the S&P 500 has pared some earlier loses it currently trades down around 0.9%. There have been minimal moves in US 10-year Treasury yields, while gold pushed around 0.6% higher and WTI oil 0.9% lower.
The USD started the week on the back foot, as the market digested the implications of President Trump’s immigration orders, but has subsequently recovered. While trading a near 1% range over the past 24 hours, the DXY currently sits little changed from yesterday’s open. US data generally came in close to expectations.
EUR/USD has initial hit hard just after midnight as the European Commission suggested it may discuss Trump migrant policies and a resurfacing of Greek bailout concerns. From around 1.0700, EUR/USD traded down towards 1.0620 before retracing the entire move following a rise in German CPI inflation to 1.9% in January from 1.7%. EUR/USD currently trades around 1.0690. EU CPI and GDP data for Q4 are due tonight.
GBP/USD trades around 0.6% lower at close to 1.2480 this morning. Already under some downward pressure, GBP took another leg lower this morning as the Scottish First Minister reiterated Scotland wants more say in Brexit at her meeting with UK PM May.
Reflective of the risk off tone, the VIX index nearly reached 13 overnight after probing below 10.50 late last week. The JPY was the main beneficiary of the risk off tone. USD/JPY is down around 1.4%, pushing progressive lower overnight and is currently around 113.70.
The NZD has performed well despite the percolating risk off tones possibly gaining some modest support from yesterday’s mildly smaller than expected December trade deficit. NZD/USD trades around 0.7290 this morning. The NZD TWI sits just under 80.0
To be sure, the loss of risk appetite has carved nearly half a cent off our NZD/USD short term ‘fair value’. But at around 0.7350 it still prefers the NZD higher. Last week’s high at just over 0.7310 would be the first target today.
AUD/USD has been remarkably stable and continues to trade with a 75 handle, as it has ever since just after the AU CPI data last Wednesday. NZD/AUD is looking to test last week’s high at just over 0.9650, with the early New Year high around 0.9730 next in view. Note the NAB AU business survey is due this afternoon.
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