By Kymberly Martin
NZD
There was not too much driving the NZD over the past 24-hours. Once again bouncing off support at 0.8080 it now trades back at 0.8100.
Risk appetite remains fairly robust, but the market is slightly directionless as it awaits Friday’s Jackson Hole meeting.
NZ interest rate markets are also fairly subdued providing little indications for the currency. We continue to see last week’s 0.8055-0.8195 range containing the currency until a tangible catalyst appears.
Tonight’s US data offerings may not prove sufficiently market moving (see Majors). Tomorrow night’s release of the Fed’s Beige Book has some potential to stir markets out of their lethargy.
The Book will highlight the fundamental assessment of the economy that the Fed will be using to inform its monetary policy decisions. Thursday’s NBNZ business survey is this week’s local release with the greatest potential to jostle markets.
The NZD/AUD found resistance at the 0.7810 level overnight. A break above this level would open the way for a rise toward late June highs at 0.7890.
There are no NZ data releases today to impact on the cross, but AU new home sales data will be released at 13.00 (NZT).
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Majors
Currencies appear to be in ‘wait and see’ mode in the lead up to the Jackson Hole meeting on Friday. A UK holiday yesterday also added to fairly muted trading activity.
Our risk appetite indicator (scale 0-100%) has eased slightly from the mid 70s to 69% over the past week. However, this remains a healthy level. It supported further modest gains in equity markets overnight.
The Euro Stoxx 50 closed up 1.1% and the S&P500 is currently up 0.20%. The USD index has maintained a relatively tight range between 81.50 and 81.70 over the past 24-hours.
The market awaits comments on Friday to see if further policy easing (likely USD negative) is imminent.
The EUR/USD received a bit of a boost from the release of the German IFO survey last night. The current assessment rose to 111.2 (110.8 expected). The potentially more important ‘expectations’ component fell to 94.2 (95.0 expected). Still, the market appeared relieved things were not worse and the EUR/USD shot up to find resistance at 1.2530. It later returned to trade at 1.2510.
The AUD/USD slipped a little lower overnight to sit just below 1.0390 at present. Despite some recent headlines fretting over the state of the Australian mining sector, the AU has remained remarkably resilient.
Our NAB colleagues to not expect any further rate cuts from the RBA whereas the market continues to price around 70bps of cuts. If the market reduces these expectations it should help support the AUD over the medium-term. For today, the market will focus on AU new home sales data.
Elsewhere, it is fairly quiet on the data front. US consumer confidence data and the Richmond Fed Manufacturing survey will be the highlight for tonight. The market will look to see if the slightly better tone in recent US data releases can continue. For now, the 81.20-81.90 range should contain the USD index.
Event Calendar: 28 August: AU home sales; US consumer confidence; US Richmond Fed index; 29 August: AU construction; US Q2 GDP; US pending home sales; US Fed Beige Book 30 August:NZ building permits; NZ NBNZ business confidence; JN retail trade; AU Capex; AU building approvals; GE unemployment; US personal income & jobless claims; 31 August: JN CPI & jobless rate; EU CPI; ECB’s Coeure & Nowotny speak; US Fed’s Bernanke speaks at Jackson Hole Economic Symposium.
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