by Kymberly Martin
The NZD was the strongest performer amongst its key peers over the past 24-hours. The NZD/USD sits just above 0.8030 this morning.
Yesterday’s NZ retails sales gave the NZD an initial boost. Q2 volumes rose 1.7% (market 1.5%), on the back of an upwardly revised 0.9% gain for Q1. This took the annual pace to 4.2%, no doubt assisted by current low interest rates and the buoyant housing sector.
The upward momentum in the NZD continued overnight as the USD paddled broadly sideways in fairly stable markets.
The NZD/USD pushed up to trade around 0.8030 this morning. Key resistance remains at 0.8060 ahead of 0.8110. Support is eyed at 0.7990.
The NZD was also stronger on the crosses overnight, pushing back up to 0.8790 relative to the AUD. A re-test of early-August highs (0.8930) looks likely in coming weeks as further evidence of NZ economic outperformance emerges.
The NZD pushed higher against a fairly stagnant EUR, despite the release of data showing the Eurozone formally exited recession in Q2. The NZD/EUR sits at 0.6060 this morning, with key resistance now seen at 0.6100.
However, the NZD’s appreciation relative to the GBP was more limited. The GBP was spurred higher by the release of UK labour data and the BoE minutes.
The key domestic data release today will be the NZ Manufacturing PMI. We would not be surprised to see further broad strength after the June reading of 54.7. The ANZ-RM consumer confidence survey will also be released. Both data should confirm the relative strength of the NZ economy provides firm underpinning for the NZD.
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Majors
Over the past 24-hours, in relatively stable markets the USD has traded sideways while the NZD and GBP have been the key outperformers.
The summer slumber in markets continued overnight. Our risk appetite index (scale 0-100%) remained at a healthy 71%. The Euro Stoxx 50 closed up 0.40% while the S&P500 is currently down a similar amount.
Benchmark bond yields traded tight ranges. Commodities pushed higher, with the global CRB index up 0.65%. The WTI oil price continues to hover above $106/barrel, close to its highs for the year.
In currency markets there was little to drive broad sentiment toward the USD index which tracked sideways around the 81.70 level.
Aside from the NZD, the GBP was a notable outperformer overnight. The GBP/USD gapped higher last night as the release of the Bank of England’s MPC minutes coincided with the release of a broad range of UK labour data.
Jobless claims were seen declining 29.2K in June (15K decline expected). Employment growth was also stronger than expected, adding to signs the economy is recovering.
The BoE minutes showed MPC member Weale voted against providing ‘forward guidance’ to the market at the last meeting. He believed the committee should be showing more commitment to its 2% inflation objective. Having flat-lined around 1.5440 yesterday, the GBP/USD traded as high as 1.5540 early this morning. It now sits at 1.5510.
Eurozone data overnight was all fairly close to expectation. 2Q GDP was shown expanding 0.3%q/q, confirming the formal end of the region’s recession. The EUR/USD traded fairly sedately between 1.3240 and 1.3280 overnight, at that centre of that range currently.
Across the Tasman yesterday, The Westpac-Melbourne Institute survey of consumer sentiment showed a 3.5% lift to 105.7. This is now somewhat above its long-term average of close to 100. It suggests RBA rate cuts and house price rises may be contributing to the uplift.
However, more broadly, we and the market still see a further RBA rate cut ahead. The AUD/USD sits slightly higher this morning around 0.9140.
Tonight, the UK will be back in focus with the release of retails sales data.Tonight, there is plenty of US data to potentially impact on USD sentiment. US industrial production, the Empire manufacturing survey, CPI, the NAHB house market index and the Philadelphia Fed business survey will all be released, along with weekly jobless claims.
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