By Dan Bell
The NZD continues to outperform and broke through resistance at 0.8240 against the USD to make a new 4 month high of 0.83 overnight. We open this morning around 0.8250.
The NZD made a new all time against the EUR last night at 0.6320 and opens at 0.63 this morning.
US Consumer confidence unexpectedly fell in January and House Prices were weaker than expected.
US equities are currently weaker on the day with the S&P 500 down 0.2%. Commodity prices are also generally weaker across the board with the CRB Index down 0.68%.
Since the U.S. Federal Reserve’s announcement last week to keep interest rates near zero until late 2014 the USD has been under pressure- weaker economic data from the US is supporting the view that the US Central Bank will be more prepared to add further monetary stimulus if needed- which is fundamentally negative for the USD. While better than expected news is supporting risk appetite and giving currencies like the NZD a boost!?
Will be interesting to see how long sentiment towards the NZD holds up. We might have a stronger economy than most at the moment but we are still heavily reliant on offshore funding and we know that global credit markets are still pretty fragile and the EU debt crisis is far from over.
European leaders have agreed on a pact for stricter budget discipline at the fist EU summit for the year which concluded yesterday but no agreement on Greece has been announced yet.
NZD/AUD traded to a high of 0.7790 overnight- highest level since Oct 2011. The first Reserve Bank of Australia announcement for 2012 is next week where they are expected cut rates again.
The NZD remains firm against GBP at 0.5235 but is weaker against JPY at 62.90.
Not much to report on the local front today. China Manufacturing PMI at 2pm will be worth a look and some second tier data from Australia - New Home Sales and Manufacturing Index.
Tonight the ISM Manufacturing PMI from the US and ADP Employment Numbers will be of interest.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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