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Spot rates within 0.1% of last week's close against the USD, except for a softer CAD and AUD; NZD stuck in a range between 0.7165 and 0.7195 USD; GBP saw a little bit of volatility, up a bit as PM May heads to Brussels

Currencies
Spot rates within 0.1% of last week's close against the USD, except for a softer CAD and AUD; NZD stuck in a range between 0.7165 and 0.7195 USD; GBP saw a little bit of volatility, up a bit as PM May heads to Brussels

By Jason Wong

It has been a quiet start to the week, with most currencies tightly bound, while UST yields are up slightly.

Current currency spot rates are all within +/- 0.1% of last week’s close against the USD, except for a softer CAD and AUD, both down 0.4%.  CAD and Mexico’s peso have underperformed as the fourth round of negotiations for NAFTA is nearing an end.   Tensions are high after the US presented proposals that could be politically unfeasible for Canada and Mexico.  NZD/CAD is up 0.4% to 0.8980.

We’re unsure why the AUD is a little softer, seeing it down to 0.7860 and NZD/AUD up 0.4% to 0.9130.  The commodity price backdrop has been positive, with oil prices about 1% higher for the day and 3½% over the past week, on rising tensions between the Iraqi government and the Kurdish semiautonomous region, and following on from Trump’s threat last week to end a 2015 nuclear agreement with Iran. Copper surged 4% above $7,000 a ton for the first time since 2014, amidst a general rise in industrial metals, on optimism about the strength of Chinese consumption and the positive global economic backdrop.  China’s PPI inflation figures released yesterday were stronger than expected on rising commodity prices.  The only other economic report of note was the New York Fed's Empire manufacturing report.  It showed decent growth momentum without inflation pressures, with the headline number matching its strongest level since 2009.

The NZD has been stuck in a tight range, between 0.7165-0.7195 on rounded figures as we await the formation of a new government and currently sits around 0.7175, near last week’s close.  Will today be the day, who knows?  On our short term model, the NZD is a touch oversold, given the backdrop of very strong risk appetite.

GBP saw a little bit of volatility, up a bit as PM May heads to Brussels to do some schmoozing to get a good Brexit deal, but then down on a Bloomberg report that “Brexit negotiations are heading for a catastrophic breakdown unless the EU signals this week that it will allow talks to move on to trade”, according to a person familiar with the UK government’s position.  NZD/GBP is up slightly to 0.5410.

EUR has tracked sideways as Spain’s PM Rajoy issued another deadline to Catalan President Puigdemont, who now must clarify by Thursday whether the region has declared independence.  NZD/EUR is up a touch to 0.6080.  On the ECB, Bloomberg ran a report that some officials see room for little more than €200bn of bond purchases next year, as the ECB is likely to run out of available debt under current rules.  Talks are focused on how to spread the additional capacity, they said.


 

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