By Mike Jones
NZD
NZD was an underperformer overnight, largely because of NZD cross unwinds, particularly NZD/EUR (post the ECB press conference, where President Draghi was not as dovish on policy as some expected) but also in NZD/AUD.
NZD/AUD took out stops through 0.8065, with more pain below with the next round of stops sitting at 0.8035.
NZD/USD flows were relatively light, after a steady slew of Macro selling in our session yesterday.
Also helping keep a lid on the NZD was talk of an M&A flow coming to the market and the drought causing an agriculture recession (see our research piece from yesterday entitled “Drought Equals Agriculture Recession”.
We still wonder if enough market attention is being paid to this and its economic consequences.
To highlight the extent of the problem, here’s New Zealand’s “weather anomaly” graph; relatively severe.
Today’s NZ focus will be on the December quarter manufacturing survey (10:45am), and its implications for Q4 GDP growth (currently seen on the cusp of 0.7/0.8% after yesterday’s chunkier than expected Wholesale Trade figures).
Also note today’s Crown accounts (10:00am) and February’s QVNZ housing figures (midday).
----------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
Another day another new record high for the DJIA. The broader S&P 500 index continues to lag the latest 0.2% gain for the Dow but is still up on the night.
US bond yields are smartly higher yet the combination of rising stocks and bonds that of late has been helpful to the USD has failed to support the greenback which is down across the board with the Euro-centric DXY index -0.5%.
This is largely on the back of a 1% rally in EUR/USD in the wake of the ECB’s ‘no change’ and continued expressions of optimism by President Draghi towards economic recovery kicking in later this year, notwithstanding the slight downgrades to the staff’s growth and inflation forecasts through 2014.
A firmer GBP after the Bank of England held its Asset Purchase Target at £375bn has also depressed the USD.
The outlier within G10 is the JPY which has lost another 0.9% to trade above Y95 for the first time since August 2009.
A well-received Spanish bond auction (maximum target of EUR5bn sold, with a higher bid-cover and lower yields than on Feb 21) has also helped the EUR, with euro-peripheral bond yield lower across the board (Spain by 11bp at 10 years, Portugal by 22bp after S&P revised its ratings outlook to stable).
US data has again been supportive of market risk, this time from an unexpected drop in initial jobless claims and which has brought the 4-week moving average down to its lowest level for 5 years.
The AUD has been dragged higher in the slipstream of firmer European currencies, but with no story of its own to tell overnight. The 1.03 level as not been threatened however and whether or not it will later this morning may turn on the latest China trade data (see below).
Other News:
*The US Dow Jones equity index set a new all-time high (as jobless claim fell to a 6-week low).
*Outgoing BOJ Governor, Shirakawa, downplays need for more stimulus, on signs of recovery.
*ECB and BOE not as dovish on policy as some expected.
*The Federal Reserve Beige Book still told of modest to moderate growth in the US economy, while the ADP jobs number (+198k) was a positive pointer to Friday’s payrolls.
Event Calendar:
8 March: NZ manufacturing activity; JN GDP; CH trade balance; US non-farm payrolls; US unemployment rate.
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.