Markets disappointed FOMC minutes did not hint at further QE

by Kymberly Martin

NZD

The NZD/USD traded higher overnight, but was knocked back on the release of the US FOMC minutes early this morning. It trades around 0.7950 currently.

Support at 0.7930 was maintained for the NZD/USD yesterday, before it began a steady ascent. Almost touching 0.8000 late last night it failed to break this resistance level. It was knocked back to earth after the release of

FOMC minutes early this morning. These appear to have disappointed market anticipation of greater promise of additional QE . The NZD/USD now trades just above 0.7950. We continue to eye near-term support at 0.7930 and resistance at 0.8000.

The NZD gained its key European peers overnight. It has made new all-time highs relative to the EUR, touching above 0.6520 early this morning before drifting down to trade around 0.6500 currently.

The NZD path relative to the AUD was a little more subdued. The NZD/AUD drifted down from 0.7790 to around 0.7780 at present.

The most important data for the cross today will be the AU employment report. We expect the unemployment rate to edge higher to 5.2% from 5.1% in May. This is in line with consensus expectations.

Today’s NZ data are less market moving. For the BNZ PMI, we just hope recent volatility doesn’t crush the reasonable optimism seen last month (55.7). The ANZ-RM consumer index will also be interesting to note, given the disappointing trends in this space of late.

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Majors

Currencies traded within relatively tight ranges over the past 24-hours. The AUD and NZD were the strongest performers.

In the absence of major data releases, and a relative dearth of headlines from the Eurozone, currency markets were relatively directionless ahead of the FOMC minutes’ release. The much anticipated minutes provided little to shock, reiterating many previous comments.

After the release, the USD index spiked higher from 83.30 to 83.60. The currency’s response, combined with a concurrent fall in US equities, suggests the market was disappointed the minutes did not point more directly toward plans of further stimulus. The USD index has reached its highest level in about two years.

By contrast, the EUR/USD that had dabbled between 1.2260 and 1.2290 for most of the night fell to below 1.220 after the minutes release. It now sits around 1.2230.

The AUD/USD was on a gradual ascent most of yesterday. It navigated improving AU consumer confidence (to 99.1 from 95.6 previously) but disappointing home loan data. The AUD/USD was underpinned by a squeeze of frustrated shorts and also supported by solid commercial appetite. It lost momentum overnight however, falling back from highs above 1.0280. It was knocked a little lower after the FOMC minutes, to sit around 1.0230 currently.

Still, the AUD took out the title of best performing currency over the past 24-hours. The key for the AUD today will be the release of AU employment data at 13.30 (NZT).

Tonight, Eurozone industrial production is released although a number of the individual components have already been released.

Also look out for comments from US Fed members Lockhart and Williams, who are speaking tonight, and will no doubt add to the yes/no QE debate.

Other news: AU home loans m/m (-1.2% vs. 0.8% expected)

Event Calendar:
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

All its research is available here.