By Kymberly Martin
NZD
The NZD/USD has traded a very steady path over the past 24-hours, despite quite a lot of movement in a number of its peers. It trades around 0.8500 this morning.
Yesterday’s ANZ commodity price index surged a further 12.6% in April. This is a new record high for the index and provides continued support for the NZD.
However, the NZD/USD took the data in its stride, trading a fairly tight 0.8460-0.8500 range since yesterday morning.
More dynamic moves were seen on the NZD crosses. Following the ECB’s announcement of a 25bps rate cut, and associated commentary, the NZD/EUR popped from around 0.6420 to as high as 0.6500 this morning.
In fairly volatile overnight trading the NZD/JPY made gains, rising off intra-night lows around 82.30 to trade at 83.20 currently.
The NZD/AUD has also traded a fairly tight range over the past 24-hours, though sitting a fraction higher at 0.8290 this morning. The next real test for the cross will come with next Tuesday’s RBA meeting.
Following a recent string of weaker-than-expected AU data points the market now prices over a 50% chance of a rate cut next week.
If one is delivered (not our central view) the NZD/AUD will likely be a beneficiary near-term. We maintain our medium-term bullish view on the NZD/AUD.
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Majors
Overnight, the EUR declined and the USD was a key beneficiary after the ECB cut interest rates.
Overnight, the ECB announced a 25bps rate cut, to take its target interest rate to 0.50%, as expected.
President Draghi did not rule out further action, including cutting the rate at which banks may place money with the ECB overnight (currently 0%) into negative territory.
He said the ECB was consulting with other parties on ways to stimulate lending, particularly to SMEs. However, the ECB still lags well behind other key central banks in that it will not unconditionally buy government debt.
The ECB’s statement emphasised that the risks surrounding the economic outlook for the Eurozone continue to be to the downside. This, along with the prospect of further rate cuts, saw the EUR/USD slide to trade around 1.3050 this morning.
The USD index was the key beneficiary, climbing from around 81.60 to trade above 82.20 currently. Demand for the USD was also strong relative to the JPY.
The USD/JPY rose from 97.20 to as high as 98.40, before settling back to trade around 98.00.
The AUD/USD slipped a little lower yesterday. AU building approvals were soft (-5.5%m/m vs. 1.0%m/m expected). The market has increased expectations for RBA cuts to almost 60bps.
The odds of a cut at next Tuesday’s RBA meeting have been ramped up to more than 50%. The AUD/USD sits around 1.0260 currently. Crucial support is now eyed around the 1.0170 level.
This has marked the bottom of the currency’s trading range on many occasions over the past year.
Tonight, all eyes will be on US non-farm payrolls (140k expected). The market is already alert to a possible disappointment following the weaker-than-expected US ADP employment report earlier in the week.
Event Calendar:
3 May: CH non-manufacturing PMI; US non-farm payrolls; US factory orders; US Fed’s Lacker speaks.
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