By Kymberly Martin
Markets were fairly quiet overnight, easing early into the holiday season. The NZD inched a little lower over the past 24-hours, from 0.7640 to 0.7580.
The NZD showed little response to the release of the Westpac consumer confidence data and Performance Services Index yesterday morning. They told contrasting stories, with the consumer confidence indicator declining from 112.0 to 101.3, while the PSI surged from 50.6 to 56.6. The NBNZ data eased a little, but confirmed the economy remains firmly in expansion mode.
The headline outlook index declined from 28.8 to 25.7, but is still consistent with GDP growth of 3%. This is our forecast. The business confidence component was little changed at 16.9 from 18.3 previously. The NZD/USD stepped down after the data, to around 0.7600. Overnight, it rose to almost 0.7630 before falling back to 0.7580 currently.
The NZD lost some ground relative to the EUR, declining from 0.5860 to 0.5820. A similar patter was seen in the NZD/GBP that has declined from an overnight high above 0.4920, to 0.4880 currently.
The NZD/AUD currently trades around 0.7640, little changed from yesterday morning. The RBA minutes today will be the key release for the cross today. The market currently prices over 130bps of rate cuts from the RBA in the year ahead. There are no NZ data releases today.
Currencies were relatively range-bound over the past 24-hours. The USD was a little stronger, with the AUD and NZD the weakest performers.
In relatively lacklustre markets, our risk appetite indicator (scale 0-100%) ticked down to 39%. The Euro Stoxx 50 closed completely flat, but the S&P500 has been declining most of the day, to be down 0.70% currently. Financials are the worst performing sector, down 1.80%.
Markets lost their lustre after comments from ECB President Draghi. He reiterated that it was not the ECB’s role to step up government bond purchases despite acknowledging that substantial risks to the economy remain. The EUR/USD dipped below 1.2990 before inching back to trade around 1.3010 this morning.
The USD index opened around 80.20, almost touching 80.50 last evening, before drifting off to 80.30 currently.
In the UK, the Rightmove house price data was slightly less gloomy than expected. House prices in December declined 2.7%m/m to register a 1.5%y/y gain. The GBP/USD was mostly on the back foot yesterday, before creeping back up to trade at 1.5520 currently.
Yesterday evening, Korea announced the death of their beloved leader, Kim Jong. The market’s response to the passing of such a widely accomplished leader was relatively muted. A knee-jerk reaction was seen in the JPY. The USD/JPY gapped from 77.90 to almost 78.20 on the news, before the currency stabilised back around 77.90.
The AUD/USD was on a downward trajectory most of yesterday. It then rose overnight before drifting off to 0.9920 this morning. It has lost 0.60% over the past 24-hours to be the weakest performing major currency. Today’s release of the RBA minutes from Dec 6 should provide some colour on the future direction of AU interest rates. This evening we also get the German IFO business survey and UK consumer confidence data.
Kymberly Martin is part of the BNZ research team.