In currency markets the NZD has underperformed following yesterday’s labour market data, while EUR has taken out another milestone, breaking through 1.19. Bond markets remain tightly bound.
After a two-week break it was tough getting up this morning, but a 5% gain in Apple shares has helped eased the emotional pain, paying for the holiday and sending the Dow index up through the 22,000 level. However, most sectors are slightly weaker and the S&P500 has spent most of the session in slightly negative territory.
The NZD is weaker on all the key crosses, sustaining much of the loss seen after the surprising dip in HLFS employment growth. The labour market reports weren’t actually that bad, with other measures of employment and hours-worked showing solid gains, the unemployment rate falling to 4.8%, its lowest level since 2008, and wage growth showing hints of bottoming out in nominal terms. But with record long speculative positioning, the NZD is priced for perfection and there was nothing in the report to suggest that the RBNZ would move anytime soon from its neutral policy stance.
The NZD sits around 0.7435 this morning, after trading in a 0.7410-0.7460 (rounded) range overnight, still down from the 0.7470 pre-labour market data level. The AUD has managed to hold its ground against the USD at 0.7970, which sees NZD/AUD nudge down to 0.9330.
At the other end of the leaderboard, EUR spiked up through a new milestone of 1.19 on no news, before meeting resistance and now trades lower at 1.1860 but still up 0.5% for the day. This has sent NZD/EUR down nearly 1% for the day to 0.6270.
GBP has also been in favour ahead of BoE’s policy meeting tonight. While no rate change is expected, since the last meeting a number of MPC members including the Governor have indicated a bias to tighten, so the minutes will be scrutinised to get a sense of timing. GBP reached an 11-month high of 1.3250 and NZD/GBP is down 0.7% to below 0.5620.
EUR and GBP strength has seen the USD majors index continue to lose a little ground. In US economic news, an upward revision to June’s ADP private payroll growth more than made up for the slightly softer than expected reading for July. In Fed-speak, uber-dove Bullard (non-voter) said in an interview that “Given the inflation outlook, which has deteriorated in 2017, I would not support further [rate] moves in the near term”. Mester (a voter next year) supported the continuation of gradually raising rates although she lowered her estimate for the level of the unemployment rate which triggers inflation from 5.0% to 4.75%. The Fed’s Williams speaks soon after the release of this daily.
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