By Kymberly Martin
NZD
The NZD/USD consolidated just above the 0.8360 level over the past 24-hours.
While the US market was closed for Martin Luther King day, global sentiment remain healthy and currency markets consolidated.
Trading in the NZD followed this pattern. Trading around 0.8360 currently, immediate support for the NZD/USD sits at 0.8330. Key resistance remains at the mid-December/early January highs above 0.8460.
Global events and broad risk appetite are likely to be the dominant drivers of the currency this week as local data is thin on the ground.
However, Thursday will see the release of the December BNZ Performance of Manufacturing Index. This is expected to improve from the November reading of 48.8.
The NZD/JPY weakened a little yesterday on the back of broad JPY strength (see Majors).
Expect volatility on this cross today as the much anticipated Bank of Japan meeting takes place. Any disappointment on BoJ delivery could see the NZD/JPY extend its recent pull-back on further JPY strength.
The other notable recent move on the crosses has been the NZD/GBP. On the back of GBP weakness the NZD/GBP has broken through key resistance levels to trade around 0.5290 currently. This is its highest level since February last year.
There are no key NZ data or events scheduled for today.
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Majors
Most key currencies traded very tight ranges over the past 24-hours. The exceptions were a weaker GBP and stronger JPY.
Our global risk appetite index (scale 0-100%) has moved up to new highs at 85%. In the backdrop of a US holiday (Martin Luther King day), European equity markets posted positive returns.
The Euro Stoxx 50 closed up 0.60%. Without specific positive catalyst the market took ‘no news as good news’, providing an excuse to drift higher.
There was little differentiation between the USD and EUR overnight. Both bobbed sideways. The USD index trades around 80.00 and the EUR/USD just below 1.3320.
The JPY strengthened yesterday ahead of today’s Bank of Japan meeting. The market appears to be sobering up ahead of the meeting. The JPY has fallen rapidly over the past 3 months, on BoJ easing expectations.
It is difficult to see what might be delivered today to exceed expectations. Near-term disappointment is possible.
There were recent headlines to the extent the Bank of Japan and Japanese government may offer a joint statement at today’s meeting. For now, the USD/JPY sits around 89.80, off the start-of-week highs of 90.20.
The GBP/USD continued its recent inelegant slide. Yesterday’s data showing the UK Righmove survey of house prices rose 2.4%y/y in January did little to help the currency.
The GBP/USD is currently struggling to find support just around the critical 1.5830 level. A break of this level would open the way for a deeper fall.
With no key data on either side of the Tasman the Bank of Japan meeting will be the key event to watch today.
Tonight, the German ZEW survey of the economy will be released along with US home sales data.
Tomorrow’s AU CPI data will be critical. This is a crucial piece of the puzzle leading up to the next RBA meeting. A low CPI outcome would strengthen the case for a February RBA cut.
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