The NZD continues 2017 on a strong footing, reaching a fresh high amidst a day in which the USD has been fairly flat.
The key headline overnight was the UK Supreme Court’s ruling that Parliament must vote before article 50 can be triggered to pull UK out of the EU. However, the court also ruled that the devolved Scottish, Welsh and N. Ireland governments, do not get a vote on the exit process. This created a bit of volatility in GBP trading, but the fall in GBP in the hours after the announcement has since been reversed. We don’t think that the decision has much implication for GBP overall with much larger Brexit risks and uncertainty overhanging the market. GBP trades this morning around 1.2530.
In the Trumpisphere, newsflow has been fairly quiet. President Trump has criticised environmental regulations. In a meeting with auto executives he vowed to reduce regulations and make the permit process move more quickly, to create a more investment-friendly climate in the US. The comment was also directed at oil companies. Soon after, he signed an executive order to help advance the Keystone oil pipeline project.
In local trading yesterday, the USD started the day on the back foot after US Treasury Secretary nominee Steven Mnuchin said an “excessively strong dollar” could have a negative short-term effect on the economy. The USD loss ground after that comment, taking NZD/USD up to 0.7265 as stop loss orders were triggered. After an eventual reversal of that move the NZD has recovered again and this morning trades close to that mark, having reached as high as 0.7277 earlier this morning, a fresh high for the year. Risk appetite has improved overnight, helping our short term fair value estimate edge back up to the 0.74 mark. The path of least resistance for the NZD remains to the upside over the short term as long USD positions continue to be unwound.
The NZD has generally outperformed. The AUD also traded at a fresh high for the year, just above the 0.76 mark, but better gains for the NZD sees NZD/AUD trade up to 0.9575 at present.
NZD outperformance sees NZD/EUR a touch above 0.6750 and NZD/JPY around 82.50.
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