By Kymberly Martin
NZD
In very quiet (holiday-induced) overnight markets the NZD/USD consolidated around the 0.8090 level.
In the absence of domestic data releases, and in the backdrop of US and UK public holidays, the past 24-hours have been fairly uneventful for the NZD.
It looks to be more of the same today, with no data scheduled on either side of the Tasman. However, keep an eye out for Fonterra’s announcement on its 2013/2014 forecast payout in the next couple of days.
The forecast payout should be well above the current estimate ($6.25 to $6.30) for the season just ending.
With diary accounting for more than a quarter of NZ merchandise exports, this announcement could help underpin the NZD after its early-May descent.
Supportive NZ commodity prices are a key pillar of our constructive NZD/USD view through to year-end. For today, key near-term support is seen at 0.8060. Resistance will be encountered approaching 0.8150.
The NZD/AUD consolidated around the 0.8390 level overnight. With the cross now sitting above our short-term ‘fair-value’ range of 0.8100-0.8.300 we see further upside as heavier going in the near-term.
However, we see the cross heading as high as 0.8700 over the medium-term, assisted by positive growth and interest rate differentials.
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Majors
In very quiet markets overnight (US and UK public holidays) most currencies traded fairly tight ranges.
Overnight, there was little pulse in most markets in the backdrop of US and UK public holidays.
European equity markets managed a fairly buoyant performance, with the Euro Stoxx50 closing up 1.1%. The EUR/USD traded as high as 1.2950, before drifting off to sit at 1.2930 this morning.
The GBP/USD followed a similar trading pattern, sitting a little lower at 1.5100 currently.
The USD/JPY traded horizontally around the 101.00 level, over the past 24-hours. Ultimately, we see further extended JPY weakness as the BoJ remains committed to monetary easing.
For now, the market absorbs the various implications of the recent short-sharp pull-back in Japanese equities, and the mid-May surge in Japanese bond yields.
Short-term JPY moves will remain highly influenced by rhetoric from Japanese officials.
The recent harsh downward momentum in the AUD/USD abated overnight, in fairly sleepy markets. The AUD/USD clawed its way back toward 0.9670 before returning to trade around 0.9640 currently.
It remains within a whisker of crucial support at 0.9580. This marked the low on the AUD/USD mid last year.
It looks like another fairly quiet day ahead, with no scheduled data releases on either side of the Tasman.
Tonight, US Case-Shiller house price data will be released. The Richmond Fed and US consumer confidence data are also scheduled. We do not expect these data to be sufficient to spur US bond yields higher, reigniting USD strength.
The state of European government finances may also come back into focus tonight, with Spain scheduled to release its year-to-date Budget balance.
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