By Kymberley Martin
NZD
The NZD/USD is fractionally higher at just above 1.8180 this morning, after a tightly range-bound night.
Yesterday’s NZ Performance of Manufacturing Index (PMI) didn’t recover that much in September, despite our hopes. While its seasonally adjusted level edged up to 48.2, from 47.4 in August, it was the third month in a row that it was in contraction mode.
However, there were sufficient glimmers in the forward-looking expectations of the latest QSBO to partially offset this rather dim gauge of current conditions. The NZD appeared little concerned by the release, trading a tight sideways path over the past 24-hours.
The NZD is marginally softer relative to its European peers. Still, the NZD remains close to the middle of its ranges of the past month or so, relative to both the EUR and GBP. This morning the NZD/EUR sits around 0.6330.
The key for this cross tonight will be the usual headlines regarding the state of the debt crisis, and also the release of Eurozone industrial production data. Expectations are already fairly depressed. Industrial production is seen contracting 4.1% y/y in August, allowing some potential for a positive surprise.
The NZD/AUD gapped lower after the release of the AU employment report (see Majors). From around 0.7990 the cross fell to below 0.7960.
However, the NZD/AUD quickly found its feet and dabbled sideways at this level until creeping up to 0.7970 early this morning. There are no key data releases on either side of the Tasman today.
For the NZD/USD we continue to see near-term support at the 0.8150 level and resistance at 0.8220.
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Majors
The USD was broadly weaker overnight, with European currencies key beneficiaries.
Sentiment was fairly robust overnight. It appears the downgrade of Spain’s sovereign rating by S&P came as little surprise to the market (see Fixed Interest). In the absence of other negative news European equities were on the ascendancy all night, closing up 1.2%.
Our risk appetite index (scale 0-100%) moved back up to 74%. In the early hours of this morning the mood was also underpinned by US initial jobless claims data that fell to the lowest level in more than four years (339k).
The US data served to confirm the ‘risk on’ mood as opposed to being seen as specifically USD positive. The USD index which subsided all night currently sits just below 79.80.
By contrast, the EUR moved steadily higher, carrying the GBP along on its coat-tails. The EUR/USD moved off overnight lows around 1.2840 to sit just below 1.2940. Support for the EUR/USD is being built at the 1.2840 level, though a catalyst for a sustained strengthening of the currency still appears absent.
The AUD got a shot-in-the-arm yesterday afternoon from the release of labour market data. The market was buoyed by the +14.5k change in employment (5k expected). The unemployment rate unexpectedly ticked up to 5.4%, from 5.1%, partly explained by an increased labour market participation rate. The AUD/USD shot from 1.0220 to above 1.2060 after the release, but then momentum faded. The currency has paddled sideways at this level all night.
Key data releases tonight will be the University of Michigan consumer confidence survey and Eurozone industrial production.
Event Calendar:
12 October: NZ, non-resident bond holdings; Eurozone industrial production; US University of Michigan confidence.
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