By Kymberly Martin
NZD
The NZD/USD has been the strongest performer amongst its peers over the past 24-hours, sitting around 0.7790 currently.
Overnight, the NZD/USD rose as high as 0.7860, as the USD briefly slumped after weaker-than-expected US GDP data.
However, the USD then launched a recovery and the NZD/USD slipped back to 0.7790.
The NZD has also been stronger on the crosses. The NZD rose against a soft GBP, taking the NZD/GBP above 0.5100 before retracing to sit at 0.5080.
The NZD/EUR climbed overnight as accommodative comments from ECB President Draghi set the EUR on a softer path. The NZD/EUR sits at 0.5980 currently.
The NZD/AUD has propelled itself back up to 0.8400. This is at the upper-end of our current short-term model-derived NZD/AUD ‘fair-value’ range of 0.8200-0.8400.
We’ll therefore likely need to see the widening of NZ-AU interest rate differentials, that we anticipate by year-end, for the NZD/AUD to achieve our 0.8900 year-end forecast.
Today will see the domestic data highlight of the week with the ANZ business confidence and activity survey, in addition to the NZ trade balance.
We expect the survey to reiterate the recent message of broad-based momentum in the NZ economy. This provides an important underpinning for the NZD in the face of broad USD strength.
For today, resistance for the NZD/USD will likely again be encountered at 0.7860. Support is eyed at 0.7720.
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Majors
It has been a quieter 24-hours in currencies. Broad USD strength continues. The GBP was the weakest performer while the NZD was the strongest.
Overnight, our risk appetite index (scale 0-100%) inched up a little further from recent lows, to sit at 55%.
European equity markets rebounded from recent falls, with the Euro Stoxx 50 closing up 2.34%. The S&P500 is currently up 1.0%.
The USD maintained its upward momentum overnight, only briefly knocked lower by the release of disappointing Q1 US GDP revisions (1.8%q/q ann. vs. 2.4% expected).
The USD index sits this morning around 83.00, rapidly approaching mid-May highs above 84.00.
The EUR was on a steady downward path overnight, likely assisted by comments from ECB President Draghi at a speech in Paris.
In contrast to the Fed’s recent message of ‘tapering’, Draghi reiterated that ECB policy will stay accommodative.
He also said the ECB maintains an open mind on additional policy instruments. Draghi repeated that the exchange rate is not a policy target but is important for price stability and growth.
The EUR/USD slipped from above 1.3080 to sit around 1.3000 currently.
In comments overnight the Bank of England said it was assessing how vulnerable the financial system may be to an abrupt rise in long-term interest rates.
This was said in the context of the recent sharp rise in long-term yields globally, triggered by recent comments from US Fed Chairman Bernanke.
The GBP/USD was the weakest performer among its key peers over the past 24-hours, falling from 1.5440 last evening to sit around 1.5320 this morning.
The AUD/USD made an attempted ascent early this morning after the release of US GDP. However it found resistance at 0.9340 before falling back to trade around 0.9280 currently.
Tonight, German unemployment data will be released, expected to remain around 6.9%, in stark contrast to much higher rates in ‘peripheral’ Eurozone. The final reading of UK Q1 GDP is also due for release.
In the US, the Fed’s preferred inflation measure, the core PCE deflator, will be released. However, this is expected to remain at 1.1%, suggesting that inflationary pressures pose little impediment to the Fed pursuing its current employment objectives. US pending home sales data will also be released.
Event Calendar:
27 June: NZ trade balance; NZ ANZ business confidence; EU German unemployment; US pending home sales; US Fed speakers;
28 June: NZ building permits; JN jobless rate; JN CPI; US University of Michigan consumer confidence; US Fed’s Williams, Dudley and Lacker speak.
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