By Kymberly Martin
The NZD has led gains in currency markets over the past 24-hours.
The GBP has also put in a sterling performance, gaining against a consolidating USD.
Equities had a solid night on either side of the Atlantic. The S&P500 Q3 earning reporting season is now in full swing. With around 10% of the companies having reported, the positive earnings surprise stands at 6.6%, led by positive surprises from the Financials sector. Our global risk appetite index (scale 0-100%) remains at a solid, if unexciting 58%.
The USD index has generally consolidated over the past 24-hours. It experienced a short bout of volatility in the early hours of this morning after the release of US CPI data, but ultimately it didn’t come to much. The USD index now trades near 97.80, still not far from its highest levels since early-March.
The GBP/USD was on the ascendancy since early yesterday afternoon. Gapping through the 1.22 level it traded higher into the evening. It then appeared to gain another boost from the release of UK core CPI data that came in above expectation at 1.5%y/y. The outlook for inflation, which of course will be impacted by the recent plunge in the GBP, may limit the BoE’s willingness to implement further policy easing. The GBP/USD now trades above 1.2300.
The AUD strengthened from around midday yesterday, before consolidating overnight. In his speech yesterday morning, RBA Governor Lowe provided a detailed discussion of the dynamics underpinning current low inflation globally. Some parallels could be drawn to the current situation in NZ, where many of the factors keeping domestic inflation low are not home-grown. The AUD/USD has consolidated its gain overnight and now trades at 0.7670.
The NZD/USD has been the star performer over the past 24-hours. It burst higher yesterday morning after the release of NZ Q3 CPI. The release was only marginally above consensus expectation, but the sharp move in the currency was likely exacerbated by positioning ahead of the release. Upward momentum in the NZD/USD continued overnight, uninterrupted by a GDT dairy auction that threw up few surprises. Average dairy prices rose 1.4% since the last event a fortnight ago.
Today there are no domestic data due. Sentiment toward the AUD and NZD this afternoon may be influenced by a large China data dump that is due. This includes industrial production and Q3 GDP.
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