There was little news on Friday, but that didn’t stop the Dow Jones index posting its eleventh daily high in a row, its longest streak since 1987, while the S&P500 rose by 0.15% to a record close. There wasn’t a lot of movement in currency markets, with the USD nudging a little higher.
The only economic releases of note were softer than expected US new home sales data, while the final reading of the University of Michigan consumer sentiment index was slightly stronger than expected, leaving it close to a cyclical high. The USD was slightly higher for the day, less than 0.1% on a TWI basis, and closing out a fairly uneventful week overall for currency markets.
The NZD closed the week close to the 0.72 mark and remained in a tight range. For the week as a whole the top to bottom of the range was barely above 1 cent at between 0.7130-0.7247. The coming week holds slightly better prospect of currency movements with a plethora of economic data released in both the US and NZ. For the latter, most releases are second-tier, so the USD will remain in the driving seat. Apart from the economic data, President Trump’s address to Congress on Wednesday afternoon NZ time will be on the market radar.
With risk appetite remaining close to a 2½ year high, our NZD short-term fair value estimate has maintained a 0.74 handle.
NZD/AUD continued to edge higher after testing the strong support level of 0.93 level mid-week. It closed the week around 0.9380. The RBA Lowe’s testimony to Parliament didn’t reveal much new, but reinforced the idea that Australian policy is likely to remain steady for some time. Lowe sees the current market pricing of rates being on hold through 2017 as “reasonable” and he reiterated his view that it was hard to say that the AUD was over-valued.
GBP was the weakest of the majors, with GBP/USD closing down 0.7% to 1.2460. There was no particular driver for the move down, just as there wasn’t a driver for the move up in the previous session. JPY was the strongest of the majors, with USD/JPY falling 0.4% to 112.10 and NZD/JPY down to 80.75, its lowest close for the month. JPY still shows a strong link to global bond yields, with lower yields supporting the yen.
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