By Kymberly Martin
NZD
The NZD/USD fell sharply on yesterday’s GDP data release, but quickly stabilized to sit around 0.8340 currently.
Yesterday’s Q3 GDP data release disappointed expectations (the markets and our own), showing growth of just 0.2% (2% annual). But there was certainly nothing in the detail to derail our expectations of a gradual growth recovery.
A pick up in Q4 growth is still expected which was also suggested by yesterday’s ANZ business survey reading. The ‘own activity’ component proved stout at +31.4, consistent with GDP growing in the order of 2.5-3.0% in the coming 12 months.
This broader assessment likely helped the NZD to quickly find its footing after its initial knee-jerk response to the GDP release. Overnight, the NZD/USD found support at 0.8320 and is now back trading at 0.8340.
There was little life shown on the NZD crosses, though a slight downward trend was generally at play. The NZD/EUR is sitting at a familiar support level just below 0.6300 this morning.
A break of this level would bring support at 0.6230 into sight. For the NZD/GBP that has slipped to 0.5120, solid support is seen around 0.5090.
The NZD/AUD has slid a little further from its mid-December highs to sit around 0.7950 this morning. There are no key data releases on either side of the Tasman in the run-up to Christmas, so pure momentum could see the cross continue to drift lower.
However, more fundamentally, we remain positive the NZD/AUD, expecting appreciation above 0.8100 in 2013. NZ’s improving relative growth and interest rate differentials (as the RBA cuts rates further while the RBNZ remains on hold) should help drive the cross higher.
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Majors
Most currencies are trading within a breath of where they were yesterday morning.
Currencies have traded fairly tight ranges despite better-than-expected US data releases. The latest headlines on the US fiscal cliff negotiations suggest talks are in fact regressing, as the Jan1 deadline looms.
Our risk appetite index maintained a healthy 75% level overnight, but equity markets were virtually flat.
The USD index showed some gyrations around data releases. The US Philadelphia Fed survey came in at 8.1 vs. -3.0 expected. Existing home sales for November grew 5.9%m/m (2.3% expected).
Sales are now at the highest annual rate in three years. However, the USD index now trades at similar levels to yesterday morning at 79.30.
The Bank of Japan extended its asset purchase program by ¥10t yesterday which was in line with expectations. It has also said it will review its understanding of ‘medium to long-term price stability’ at its next meeting.
This hints at moving toward recently elected P.M Abe’s goal of a 2% inflation target. Still, yesterday’s actions fell short of aggressively surprising the market and the USD/JPY consolidated around the 84.30 level.
The AUD/USD has traded sideways around 1.0480 over the past 24-hours. There is little on domestic calendars to drive Australasian currencies today. More broadly, risk appetite will be impacted by further US fiscal cliff headlines in the run-up to Christmas.
Tonight, US durable goods orders and personal spending data will also be released.
Event Calendar:
21 December: NZ net migration; NZ credit card spending; UK public finances; US durable goods orders; US Chicago Fed index.
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