By Kymberly Martin
NZD
The NZD/USD was the strongest performing key currency over the past 24-hours, now sitting just above 0.8300.
The NZD showed little reaction to yesterday’s RBNZ announcement. The statement provided little to shock markets and NZ interest rates remained virtually unchanged.
Rather, after paddling slightly higher overnight, the currency surged early this morning after the US Federal Reserve announced QEIII.
As the USD broadly fell from favour, ‘risk sensitive’ assets attracted strong demand. The NZD/USD burst through early August highs and now sits close to the top of its March-April trading range.
If the current global market euphoria is maintained the NZD/USD may look to revisit post-float highs above 0.8400.
For now, resistance is eyed at 0.8320, which marks the top of the March-April trading range.
The NZD is higher on all crosses, including the NZD/AUD. NZ-AU interest rate differential remained fairly steady yesterday.
The RBNZ statement failed to increase NZ OCR rate cut expectations.
At present the NZD/AUD is sitting just below the late June highs of 0.7890. A convincing break of this level today would open the way for a move above 0.7950.
There are no key data releases on either side of the Tasman today. The driver of the cross will likely therefore be general risk appetite, as seen overnight.
------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
After the Fed’s announcement of QEIII early this morning the USD fell and ‘risk-sensitive’ currencies rallied.
Last night was all about the Fed. There was little pulse in currency trading ahead of the FOMC early this morning. In the event, QEIII was delivered, as broadly anticipated.
US equities surged higher, as did our risk appetite index (scale 0-100%) from 73 to 76%. This is the highest level of the index since February 2011. The USD index fell rapidly from above 79.80 to around 79.20.
The key beneficiaries of the increase in risk appetite and rejection of the USD was the NZD and AUD. The AUD/USD was rapidly catapulted from 1.0440 to sit around 1.0550 currently. Early August highs above 1.0600 are now within sight.
There are no AU data releases today. The currency’s fortunes will therefore be dictated by the market’s ability to maintain current euphoria and appetite for risk.
US data releases tonight; retail sales, industrial production and the University of Michigan confidence indicator, have the greatest potential to dent risk appetite if they disappoint expectations.
European currencies also benefited from the sell-off in the USD. The EUR and GBP made rapid ascents this morning, to sit around 1.2990 and 1.6150 respectively. The GBP/USD is now at the highest level since early May. The late April high of 1.6300 is now being eyed.
The EUR was also underpinned by the pro-Europe outcome in yesterday’s Dutch election, and by a positive Italian sovereign bond auction. With the Fed meeting now out of the way, attention may turn to headlines emanating from the EU finance minister’s meeting beginning in Cyprus this evening.
Event Calendar:
14 September: Eurogroup meeting; US CPI; US retail sales; US Michigan consumer confidence.
No chart with that title exists.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.