By Kymberly Martin
NZD
The NZD was the strongest performer of its peers over the past 24-hours.
The NZD/USD crept a little higher in fairly uneventful markets overnight. Touching 0.8430, it has slipped back to 0.8400. Domestically, the key for the currency today is the 4Q Quarterly Survey of Business Opinion.
We expect the survey will firm a fraction from the mild growth it showed in September. What the survey implies for the labour market will also be crucial.
We suspect it may act as a counterweight to the recent HLFS survey which implied unexpected weakness. Overall, we suspect the survey should provide the foundations for the 2.2% GDP growth we forecast for 2013.
Elsewhere, the market will also be looking to comments from Fed Chairman Bernanke (10am NZT). If the market is nudged into reassessing its more hawkish assessment of the recent December Fed minutes the USD could be a casualty. The NZD/USD would likely be a beneficiary.
On the crosses the NZD was stronger overnight relative to its key European counterparts (see Majors). The NZD/GBP, at 0.5230, is close to revisiting crucial resistance around 0.5260.
Key resistance for the NZD/USD remains at the mid-December highs around 0.8470. Support is eyed around 0.8360.
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Majors
Most major currencies have traded fairly tight ranges over the past 24-hours. The USD index consolidated around 79.50. The GBP underperformed along with the CHF. The NZD and AUD outperformed.
Our global risk appetite index (scale 0-100%) is clinging on at a hefty 82%. However, there is a sense that New Year euphoria is fading.
The reality of long and arduous US debt ceiling/’fiscal cliff’ spending negotiations are now upon us.
In addition, talk has returned to draft plans for the ESM to support European banks. There are calls to make the ESM funding an absolute “last resort” after all other avenues within individual countries have been exhausted.
In the slightly more sober mood, equity markets on both sides of the Atlantic were unable to post positive returns.
Sentiment toward the common currency was also not helped by data showing Eurozone industrial production fell 3.7%y/y in November (-3.1% expected). This is its lowest level of growth since December 2009.
The EUR/USD slipped from highs last evening above 1.3400 to trade around 1.3360 currently.
The JPY traded a slightly tumultuous path over the past 24-hours, but overall the recent clear weakening trend continues.
Our momentum model shows the JPY displays overwhelmingly negative momentum on all currency pairs.
Yesterday, Japanese Vice Finance Minister Nakao attempted to counter the jibe from Fed’s Bullard last week regarding recent JPY weakness. He denied weakness was due to intervention, describing depreciating as “correction of a previous excessive rise”. The USD/JPY sits a little higher this morning at 89.30.
The AUD/USD has stabilised around the 1.0560 level, with key resistance still eyed at 1.0600. There are no AU data releases so expect the currency to take its direction from broad market risk sentiment today. The most important local event for the AUD this week will be Thursday’s labour force data.
Tonight, along with further Fed-speak (Kocherlakota), US industrial production, mortgage applications and NAHB housing data will be released. In Europe, German GDP data for 2012 will be released. UK CPI, house price and retail price data are also due.
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