By Kymberly Martin
Since the start of the week the USD has weakened against most of its peers. The NZD has outperformed, while the GBP/USD has pretty much moved sideways.
Markets have started the week in pretty orderly fashion. There was a notable 1% decline in WTI oil price futures, taking them back below USD50/barrel. There is scant evidence that OPEC is making progress toward limiting supply. Additionally, a report showed rigs targeting crude production in the US rose for a seventh week to their highest level since February.
The EUR/USD has started the week on the front foot. From 1.0970 it now sits around 1.1005. However, this was not able to provide an updraft for the GBP/USD. It has traded sideways since the start of the week, now sitting around 1.2190.
The AUD/USD initially traded lower at the start of the week, slipping back toward 0.7580. However, in the evening it was boosted by the weaker USD and has trade back to 0.7620, the level where it closed last week. Today, the market will be looking out for a scheduled speech from RBA Governor Lowe and the publication of the RBA’s most recent Minutes.
The NZD/USD was on the ascendancy from midday yesterday. The release of the NZ PSI for September (54.1) dipped from the August reading, but was very similar to that recorded in July. Looking through the monthly volatility, there has been some trend slowing in the PSI over recent months, though the outright level is still solid. It was certainly nothing to challenge the central premise that NZ activity remains robust despite subdued inflation.
We will gain the latest insight on the latter today with the release of NZ Q3 CPI. Also look out for the latest GDT auction in the early hours of tomorrow morning (NZT). We expect little change in prices since the last auction.
The NZD/USD has traded up from yesterday’s lows around 0.7080, to currently sit just below 0.7140. The NZD has also rebounded on the cross. From 0.9300, the NZD/AUD now trades around 0.9360, again above the 200-day moving average at 0.9330. The cross is comfortably with our model derived short-term ‘fair value’ range of 0.9100-0.9450. We expect consolidation around these levels over coming months.
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