By Kymberly Martin
NZD
The NZD/USD staged a bit of a recovery over the past 24-hours to trade at 0.8500 this morning.
As broad sentiment began to recover from yesterday morning’s post-Boston-bombings nadir, the NZD traded on an upward path.
As the USD was shunned overnight the NZD/USD maintained upward momentum to trade at 0.8500 currently.
The general trend was helped by a supportive Global Dairy Trade auction overnight. This showed an average 0.6% gain in dairy product prices. Prices are now 86% higher than a year ago.
The NZD/JPY also staged a recovery, trading off yesterday morning lows below 81.00 to sit around 83.00 currently.
This type of trading in NZD/JPY may become a familiar pattern. i.e. short burst of ‘risk off’ behaviour may see the NZD/JPY weaken but the longer-term trend will be toward continued strength.
The NZD/AUD moved higher before finding resistance at 0.8190 overnight. It trades at 0.8180 currently. The key local data today for the cross and the NZD/USD will be NZ CPI (10.45 NZT).
In line with the market we expect a 0.9%y/y outcome. The broad message of bottoming inflation in the backdrop of solid demand growth should remain intact.
---------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
Over the past 24-hours risk appetite has recovered somewhat. The USD and JPY have underperformed.
Our risk appetite index (scale 0-100%) rebounded from 68 to 75% last night.
While the Euro Stoxx 50 still recorded a -0.60% return the S&P500 has managed to recover by 1.3%. The broad CRB global commodity index is also up 0.80%.
Data on either side of the Atlantic was fairly mixed last night, but the market appeared ready to take a breath after the previous day’s negative mood.
Consequently the USD and JPY were shunned as ‘safe havens’. The USD index slipped from overnight highs close to 82.50 to trade below 81.80 this morning.
The USD/JPY strengthened from lows below 96.00, to trade around 97.50 currently.
Trading in the JPY will likely continue to show a similar pattern. Periods of risk aversion may see demand for the currency return for short periods.
However, sellers will likely soon appear as the market remains focused on a medium-term view of further JPY weakness.
European currencies were beneficiaries of USD weakness overnight. The German ZEW survey came in below published expectations (economic sentiment 36.3 vs. 41.0).
However, after a brief downward response the EUR/USD quickly recovered, trading up to 1.3180 this morning.
The GBP/USD also managed some upward momentum, this morning trading at 1.5370 currently.
Yesterday’s UK CPI data showed core inflation running at 2.4%y/y, still uncomfortably high given the very low growth backdrop.
Tonight, all eyes will be on the Bank of England Minutes (see Fixed Interest). UK labour data will also be released.
Yesterday’s release of RBA Minutes were taken as somewhat less dovish than previous. The phrase “further reductions may be required” was removed from the policy intent statement. The market continues to price expectations of at least one more 25bps rate cut from the RBA.
However, AU swap yields rebounded 5-10bps yesterday helping underpin the AUD. The AUD/USD has traded off yesterday morning lows close to 1.0300 to sit around 1.0390 this morning.
Tonight, the US Fed also releases its Beige Book survey of the economy.
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.