By Kymberly Martin
NZD
The NZD was one of the weakest performing currencies on Friday night. The NZD/USD trades at 0.8570 this morning.
The NZD traded a fairly quiet path during the day on Friday, but came under downward pressure in the evening.
A combination of uninspiring trans-Atlantic data releases and renewed Cyprus niggles took the gloss off markets at the end of week.
The NZD/USD traded down from above 0.8640 to finish the week around 0.8590. It has started this week a little lower, trading at 0.8570 currently.
The NZD/JPY slipped from recent highs, as the JPY was broadly stronger (see Majors). The NZD/JPY slipped almost 2.0% to close the week around 84.50. It has opened a little lower at 84.00 this morning.
The NZD/AUD has pulled back a little from its Thursday highs to trade around 0.8140 this morning. February highs at 0.8230 remain the key resistance level.
Key events for the cross this week will be today’s Chinese data dump, tomorrows RBA minutes and Thursday’s NZ CPI.
Regardless of near-term fluctuations we continue to hold a constructive NZD/AUD view, underpinned by positive growth and interest rate differentials. Our year-end forecast remains 0.8500.
For today, we are hopeful the BNZ PSI can corroborate the message of last week’s PMI that these sectors of the economy remain solidly in expansion.
Key for risk sentiment (and the NZD) over the next 24-hours will be Chinese data releases and US Empire Manufacturing and NAHB housing data. The market looks for Chinese Q1 GDP at 8.0%, up from 7.8% previously.
The market will have a low tolerance for any softness in US data, given Friday’s lacklustre outcomes. However, more broadly in the absence of any major disruption to offshore risk sentiment, we expect the uptrend in the NZD/USD to continue.
There is little topside resistance ahead of 2011’s 0.8850 post-float high.
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Majors
On Friday night the JPY was the strongest performer. The ‘commodity’ currencies CAD, AUD and NZD underperformed.
Equities were on a downward path on Friday. The Euro Stoxx 50 closed down 1.50% and the S&P500 -0.30%.
A combination of factors combined to dampen sentiment. There is heightened uncertainty surrounding the Cyprus bailout with apparent friction between the Cypriot government and central bank.
Speculation Cyprus will sell some its ‘excess’ gold reserves also helped a 5.0% plunge in gold prices on Friday night. There were also widespread declines across other metal and energy prices.
Data released on either side of the Atlantic were also underwhelming. Eurozone industrial production beat expectations, rising 0.4%m/m in February, but this hardly offset downward revisions to the previous month.
Production fell 3.1%y/y. Later in the evening US retails sales data declined -0.4%m/m in March (0.0% expected). Finally, the April University of Michigan consumer confidence index slumped to a nine-month low of 72.3 (78.6 expected).
In this backdrop the USD was tossed around. The market appeared uncertain whether to respond to weak US data by selling the USD or buying it as a ‘safe haven’. After much volatility the USD index finished Friday night almost unchanged around 82.20.
The JPY appeared to take up its mantel as a ‘safe haven’ on Friday night, despite its recent BoJ inspired collapse. On Friday the JPY gained 1.30% on the USD. The USD/JPY fell from above 99.50 to just above 98.00.
In the backdrop of weak equity and commodity markets, the CAD, AUD and NZD all came under selling pressure.
The AUD/USD ended the week just above 1.0500. Today, a slew of Chinese data releases will be crucial for the AUD.
Tomorrow’s RBA minutes from its 2 April meeting will also be important. The RBA’s recent communications have portrayed a mild easing bias but comfort with currently being ‘on hold’. The market prices around 30bps of further cuts from the RBA.
Tonight, the US Empire Manufacturing survey will be released along with NAHB housing data.
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