By Kymberly Martin
NZD
The NZD was amongst the weakest performers over the past 24-hours. The NZD/USD trades around 0.8490 this morning.
The NZD/USD traded a fairly quiet path yesterday in the absence of any local data releases, and a Chinese PMI that failed to provide any nasty surprises (50.6 vs. 50.7 expected).
Today’s HSBC version of the same index will similarly be unlikely to ruffle any feathers.
Rather, it was the early morning release of the US ADP employment report that saw dampened demand for ‘risk sensitive’ currencies such as the AUD and NZD.
The NZD/USD slipped from around 0.8570 to trade close to 0.8490 this morning.
Last night’s GDT milk auction showed dairy prices fell 7.3% on average from the previous event.
This is a correction following the strong 60% surge from December last year to April this year.
Prices still sit 77% higher than a year ago. We do think dairy prices will decline further through this year as the current supply tightness slowly unwinds.
However, this is consistent with our view of a still well supported NZD underpinned by growth and interest rate differentials.
The NZD was weaker relative to its European peers overnight. The NZD/GBP and NZD/EUR now sit toward the lower-end of ranges maintained in recent months.
The NZD/GBP trades around 0.5450 this morning with key support eyed at 0.5420. Near-term support for the NZD/EUR is eyed at 0.6410 (currently 0.6440).
Today, the ANZ commodity price index will be released. This is likely to show consolidation after its recent big gains.
Tonight, the focus will return to Europe with the ECB expected to cut rates by 25bps, though this outcome has already been widely anticipated by markets.
---------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
The USD is only slightly weaker, but the NZD and AUD underperformed overnight.
Overnight, while the market waited with anticipation for this morning’s Federal Reserve meeting, the greater surprise came from the US ADP employment report. Coming in below expectation (119k vs. 150k expected), it set US equities and bond yields on a lower path.
However, only a limited toll was taken on the USD index. It slipped from around 81.60 to below 81.40.
However, the ‘risk sensitive’ AUD and NZD came under downward pressure. The AUD/USD slipped from 1.0360 before finding support around 1.0280.
Later this morning, the US FOMC meeting provided not too much to surprise markets. No tapering of asset purchases was hinted at.
However one committee member, Esther George, again dissented on asset purchases saying “the high level of monetary accommodation increased the risks of future economic and financial imbalances”.
However, this did not seem to be the broad committee’s central concern as it remains focused on low inflation and a sluggish labour market.
As the market absorbed the FOMC’s message currency markets experienced a little short-term volatility but were largely unchanged overall.
The GBP/USD gapped higher last night after a rare piece of better-than-expected UK data. The UK Manufacturing PMI came in at 49.8 (48.5 expected).
Although still contracting, manufacturing activity is creeping back toward expansion territory (over 50).
The GBP/USD moved up from 1.5530 to hit overnight highs above 1.5600. It sits around 1.5570 this morning, close to its highest levels since mid-February.
Tonight, all eyes will return to Europe with the final readings of EU PMIs, and the ECB scheduled to announce interest rates.
We, along with the consensus expect the ECB to cut 25bps, in an effort to offset now widespread growth weakness in the region. Then it will be on to the end of week risk event, with Friday’s US payrolls.
Following last night’s softness in the ADP employment report the market will be alert to the possibility of a disappointment on Friday.
Event Calendar:
2 May: NZ ANZ commodity prices; AU building approvals; CH HSBC manufacturing PMI; EU PMIs; EU ECB decision; US jobless claims
3 May: CH non-manufacturing PMI; US non-farm payrolls; US factory orders; US Fed’s Lacker speaks.
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.