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Exporters keen to take advantage of the recent slip in the NZD; risk appetite index at highest since July 2011

Currencies
Exporters keen to take advantage of the recent slip in the NZD; risk appetite index at highest since July 2011

By Kymberley Martin

NZD

The NZD traded with a slight downward bias over the past 24-hours, to sit just above 0.8170 currently.

Yesterday morning, Fonterra trimmed its payout forecast setting a generally cautious tone for trading in the NZD. Our flows show some commercial selling of the NZD/EUR cross.

However, our book shows support for the NZD from exporters keen to take advantage of the recent slip in the NZD to hedge their exposure. The NZD/EUR slipped from 0.6250 to trade around 0.6210 currently.

However the NZD made some steady headway relative to the AUD, that was weighed down by the weekend news of China’s large trade deficit. The NZD/AUD moved up from 0.7750 yesterday morning, to trade above 0.7780 currently.

Today, the NZ QV house price data for February will be released. It is expected to show house prices getting towards a 3% rise on a year ago. Early tomorrow morning, all eyes will be on the US Federal Reserve’s meeting.

For now, support for the NZD/USD continues to be seen at the 0.8140 level. Resistance is eyed at 0.8200.

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Majors

It was a relatively quiet 24-hours in markets. There was a lack of key data releases. The market absorbed the implications of the “orderly Greek default”, and remains in “wait and see” mode ahead of today’s US Federal Reserve meeting. The USD index traded down from 80.00 to 79.90.

Markets were eerily quiet with the Euro Stoxx 50 and the S&P500 currently flat.

Our risk appetite index has crept up further to 66%, its highest level since July 2011.

The market has absorbed a lot of news recently, and overnight remained directionless in the absence of any major data releases. However, the high level that risk appetite has reached suggests meaningful upside surprises in data or news-flow will be necessary to provide the next leg up in “risky assets”.

Conversely it wouldn’t take too much to knock them back. In this backdrop, the USD index traded in a very tight range overnight around the 80.00 level, drifting off to trade just below 79.90 currently.

In the backdrop of a slightly weaker USD the EUR/USD traded up from 1.3100 to 1.3150. The GBP/USD broke previous support at the 1.5650 level overnight, trading down to almost touch 1.5600. It has recovered a little to trade around 1.5640 currently. However, there is now little technical support to the currency ahead of the 1.5430 level.

The AUD drifted lower over the past 24-hours despite fairly stable risk appetite. It has now fallen below its trading range since the start of February, weighed on by the Chinese trade data release over the weekend. The AUD’s prospects remain intricately linked to the outlook for the world’s second largest economy.

Hints of a more aggressive policy response from the People’s Bank of China may be required to boost the AUD. Overnight the AUD/USD fell from around 1.0570 to trade at 1.0500 currently.

The key AU data release today is the NAB business confidence survey. Elsewhere, the BoJ and US Federal Reserve announce rates (see Fixed Interest). This evening, the German ZEW survey will be published as an important indicator of business sentiment in “core” Europe.

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