by Kymberly Martin
NZD
Trading in the NZD/USD was fairly uneventful over the past 24-hours. Finding support at 0.7930 the currency now trades at 0.7960.
A rare night of modest favour for the EUR curtailed the recent, seemingly insatiable, ascent of the NZD/EUR.
Having touched above 0.6500 the cross drifted lower to trade below 0.6470 at present. We have been looking for a ‘peak’ in the NZD/EUR around 0.6500/0.6600 for some time now.
Still, with ongoing uncertainty prevailing in the Eurozone, we would be wary of calling ‘the top’ yet.
Today’s QSBO business survey is the most important local data release this week. Not that it ever seems to move the NZD.
We expect the QSBO to maintain a moderately positive view on GDP growth, employment and investment (albeit with confidence flattened by Europe). But also to be a reminder of the economy’s limited spare capacity. i.e. the risk of inflationary pressures building further down the track.
We expect generally muted risk appetite to contain the ‘risk-sensitive’ NZD in the week ahead. The NZD/USD is likely to struggle to sustain bounces above 0.8000. The bigger risk is for a pullback back towards support at 0.7870. In this regard, continue to keep an eye out for comments from the EU Finance minister’s meeting.
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Majors
In the absence of major data releases, and only a trickle of comments seeping from the EU minister’s summit, currencies traded without significant drama.
Risk appetite remained somewhat muted overnight. Our risk appetite index (scale 0-100%) pulled back a little from 61%-58%. Equity markets recorded modest -0.3 to -0.7% returns.
Comments from the latest EU summit and ECB Draghi’s attendance at Parliament seeped out. Spain was at the centre of EU talks with suggestions loans for Spanish banks could be agreed on July 20.
ECB President Draghi commented on the need to move toward further sharing of sovereignty within the Eurozone.
The EUR/USD actually managed to find some support after its sharp fall of the past week. It inched higher from 1.2260 yesterday morning to trade around 1.2310 currently. We see this as short-term respite as opposed to a real change in sentiment toward the single currency.
By contrast, the USD index drifted off from above 83.40 to trade just below 83.20. Fed member Williams stated the somewhat obvious that “extension of ‘operation twist’ will have a relatively modest impact on the economy”. Rather he sees new bond buying, including mortgage-backed securities as the most effective tool if action is required. The debate around further quantitative easing will likely remain alive and well into the next, Aug 2, FOMC meeting.
The JPY/USD showed some volatility around the release of Japanese current account data. It showed Japan recorded the smallest current account surplus (¥215.1b) in May, since at least 1985.
Still, in the bigger scheme of things the JPY still appears quite well supported by its perceived ‘safe haven’ status. It traded around the 79.60 level over the past 24-hours.
The AUD along with the NZD traded largely sideways over the past 24-hours. The AU business confidence indicator is released today.
More important for the currency may be the 2pm (NZT) release of China trade balance data. Elsewhere, expect continued comments drifting out from the EU finance ministers meeting in Brussels to impact on general market sentiment.
Other news: German trade balance 15.3b vs. 14b expected.
Event Calendar:
9 July: 10 July: NZ QSBO business confidence; NZ retail data; UK RICS house price balance; AU NAB business confidence; UK IP, manufacturing production, & trade balance; US Fed’s Bullard speaks;11 July: AU home loans; US trade balance; US FOMC minutes; 12 July: NZ PMI; NZ food prices; AU employment; Bank of Japan meeting; EU ECB monthly report; EU IP; US Fed’s Williams & Lockhart speak; 13 July: CH IP, GDP, retail sales, & investment; JN IP; US PPI
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