A positive mood swept through markets overnight, supported by an upbeat tone to the limited data that was out. Equities, oil and bonds yields are all higher. It’s risk on. Currency movements were generally contained, with the US dollar marginally higher overall.
Germany’s IFO survey kicked off the positive data late last night in rising unexpectedly for a sixth consecutive month to its highest level since 1991. US consumer confidence followed suit in rising unexpectedly, with the present conditions index lifting to a 16 year high.
Equities are higher on both sides of the Atlantic, with the S&P 500 continuing to push record highs currently up 0.3% on the day lead by the energy sector. Oil prices are up more than 3% adding to yesterday’s gains. Saudi pledged deep cuts to crude exports while UAE said it would deepen curbs, starting September. Brent crude has stretched up to $US50/bbl on the news.
The risk on mood and higher oil prices have had clear influence on currencies overnight with the safe haven JPY and CHF at the bottom of the leaderboard down 0.7% and 0.6% respectively. USD/JPY opens this morning at 111.90. Meanwhile, NOK sits at the top up 0.4% against the USD.
EUR/USD pushed up through 1.1700 and GBP/USD rose above 1.3080 during the night, but neither could sustain the gains as the US dollar recovered post the better US data. EUR/USD and GBP/USD currently sit around 1.1650 and 1.3030 respectively, about flat on the day.
AUD/USD had a look up to 0.7970 during the night supported by higher commodity prices, before paring gains as the USD strengthened. Iron ore prices rose 2.4%, adding to yesterday’s 1.1% gains. AUD/USD opens 0.2% higher this morning, around 0.7940.
NZD/USD tested 0.7450 on the topside overnight before drifting lower on USD strength to currently sit around 0.7410. NZD/JPY is up around 0.3%, on a softer JPY, with the pair testing the 83 level this morning.
There has been no lasting impact from yesterday’s news of a common cow disease being found in NZ for the first time. The NZD dipped sharply toward 0.7400 yesterday on the news but regained composure quickly returning to pre-news levels. This seems appropriate given there is no food safety risk.
The market awaits this morning’s speech from RBNZ Assistant Governor and Head of Economics John McDermott’s speech to be published at 8.15am. It gives an opportunity for the RBNZ to try and jawbone the NZD lower as the NZ TWI is currently running around 3.6% above the latest RBNZ projections. A stronger NZD is one factor that strongly opposes the RBNZ following some other central banks in becoming more hawkish. Indeed, on its own, it suggests the exact opposite. But with words like ‘economic trends’ and ‘flexible inflation targeting’ in the speech subject matter the bigger message, if there is one for markets, may well be that the Bank still intends sticking to its projected on-hold policy course well into 2019. Also today, we don’t expect today’s NZ’s trade figures to materially move the market.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
BNZ Markets research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.