by Kymberly Martin
NZD
The NZD has been supported by a better tone in markets (European and US equity markets are up 0.70- 2.0%). The NZD/USD currently trades around 0.8170.
Yesterday’s NZIER quarterly survey of business opinion showed business expectations remain lofty, despite recent past malaise.
In line with the recent National Bank survey, it actually suggests some upside risk to our own view of a modest expansion in growth from a low base.
However we stick with our view of an economy growing at 2.4% in calendar year 2012, rising to 2.9% in 2013.
The release did not have a meaningful impact on the NZD that continues to derive direction from global sentiment. In this regard it was aided by a slight improvement in mood over the past 24-hours (see Majors).
The NZD/USD found resistance at 0.8220 this morning, returning to trade just below 0.8170 at present. We continue to see support at 0.8120 and resistance at 0.8220.
Trading relative the key European currencies (GBP, EUR) showed a similar pattern overnight. The NZD made gains versus both to highs early this morning, before subsiding to trade at similar levels as yesterday morning. The NZD/EUR currently trades just above 0.6230.
The NZD/AUD lost a little ground. Rising AU interest rates (reversing previous days’ losses) helped to underpin the AUD. The NZD/AUD currently trades around 0.7940. This cross should be volatile today with key releases on both sides of the Tasman. At 10.30am (NZT) the NZ PMI is released, and at 1.30pm (NZT) AU employment data.
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Majors
Market sentiment improved somewhat over the past 24-hours. The USD and JPY are lower and the AUD was the strongest performer.
Market sentiment improved overnight. Our risk appetite indicator (scale 0-100%) inched up to 54%. Alcoa, the first of the S&P500 companies to report Q1 earnings announced an unexpected profit.
Concerns regarding Spain eased a little.
Early this morning the Fed’s Beige book noted that in all 12 regions the economy maintained expansion, with manufacturing, hiring and retail showing signs of strength despite higher fuel prices.
The USD lost some of its “safe haven” appeal in this environment, as did the JPY. However, the USD index bounced off intra-night lows of almost 79.50 to trade around 79.80 currently. The USD/JPY crawled higher from around 80.70 to current levels around 80.90.
The EUR/USD was on the ascendancy in the evening touching above 1.3150. The EUR found favour as Spanish bonds rose and Italy held a successful auction of sovereign bills. Early this morning it lost momentum, drifting back to trade around 1.3100 at present.
The AUD/USD has been on a fairly steady upward path, reversing much of the previous day’s losses. It now sits around 1.0300, as it faces a busy day on the AU data front. Consumer inflation expectations will be released this afternoon.
The more important release for the currency will likely be employment data to be released at 1.30pm (NZ time). The market expects the unemployment rate to tick up from 5.2% to 5.3%.
A weaker outcome and/or fall in inflation expectations (currently 2.7%) would increase the possibility of future RBA rate cuts. The market currently prices around 95bps of rate cuts in the year ahead.
Tonight, US weekly initial jobless claims will be released and will likely be scrutinized with additional intensity in the wake of last Friday’s disappointing payrolls number. Eurozone industrial production data will also be released, giving a timely indicator of the region’s industrial health.
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