by Kymberly Martin
NZD
The NZD was the weakest performer over the past 24-hours, losing around 0.80% relative to the USD. It currently trades just below 0.8150.
In the absence of local data releases the NZD was at the whim of global sentiment, which soured further overnight (see Majors).
The NZD/USD saw fairly steady selling pressure from last evening, trading from around 0.8220 to 0.8150 at present. Sentiment toward the NZD and its “commodity-linked” peers was not helped by IMF comments overnight that “commodity exporters should anticipate lower prices”.
The NZD/AUD also declined fairly steadily overnight from around 0.7970 to trade just below 0.7940 currently. The NZD did not fare any better relative to its European peers, sinking relative to both the EUR and GBP.
Still, it remains within recent ranges relative to both, trading at 0.6230 relative to the EUR at present.
Today we get the NZIER Quarterly Survey of Business Opinion. The recent National Bank business survey suggested that the New Zealand economy is about to take off. We are sceptical that the pace of expansion suggested by this survey can be achieved. Nonetheless, we do believe the economy is building up a head of steam and envisage an NZIER report that supports this.
Despite this, the dominant driver of the NZD today will likely remain global risk sentiment.
Through all its recent gyrations, the NZD/USD is still very range-bound. We see support at 0.8120 and resistance at 0.8240.
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Majors
It was a clear return to “risk off” over the past 24-hours. The USD outperformed all its peers except the JPY.
Building on last week’s negative sentiment resulting from the disappointing US payrolls number, markets have returned to fret over the outlook for Europe
In addition, the mood was not helped by an article in that the IMF is to sharply lower their view on China trade. The IMF also said that commodity exporters “may be in for a downturn”.
In this backdrop, “commodity-linked” AUD, CAD and NZD underperformed European currencies.
As risk sentiment deteriorated further, our risk appetite indicator (scale 0-100%) fell from 57%-51%. The Euro Stoxx 50 closed down 3.0% and the S&P500 is currently down 1.70%. The CRB global commodity index declined 1.40% and the WTI oil price fell 1.20%.
Despite some fairly choppy trading the USD has benefitted from “safe haven” demand in this backdrop. The USD index is currently trading around 79.90, up from overnight lows around 79.60.
The JPY was on the ascendancy since the Bank of Japan announced its target rate. It kept this unchanged as anticipated but did not announce any further monetary stimulus, that some had expected. Demand for the “safe haven” JPY was also boosted by the generally dampening in mood overnight. Consequently, the USD/JPY fell from 81.80 to trade around 80.70 currently.
Trading in both the EUR and GBP has been somewhat volatile, though a general down trend has dominated. The EUR/USD now sits around 1.3080, and the GBP/USD just below 1.5880.
From yesterday afternoon, the AUD, NZD and CAD have been on a fairly steady downward path. They were undermined by the generally waning in risk sentiment. The IMF comments regarding commodity exporters also did not help the prospects of these “commodity-linked” currencies.
The AUD/USD fell from highs above 1.0350 yesterday afternoon to trade around 1.0260 currently. Today, AU consumer confidence and home loan data will be released. However, these will likely be over-shadowed by general developments in risk sentiment as the Asian equity market likely follows the US market lower.
Tonight the focus will be on the release of the US Fed’s Beige book on the economy.
Today the Q1 US earning reporting season kicks off with aluminum-company Alcoa reporting.
This season will be closely watched, as to date, US corporate sector profitability has been a relative bright spot in the global economic landscape.
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