by Kymberly Martin
The NZD experienced some volatility overnight but sits a little higher at 0.8080 this morning.
Yesterday’s NZ PMI served to reinforce the message that domestic economic momentum is very strong.
The PMI moved up to 59.5 in July from an already heady 54.7 in June. The results were very impressive given the marked slowdown in the Australian economy and its importance for NZ manufactured exports.
The NZD/USD crept higher through the day yesterday to touch 0.8100 last evening. It then became a victim of a the surge in the USD early this morning.
The NZD/USD fell as low as 0.8000 but has clawed its way back to 0.8080 this morning as the USD has subsided.
The NZD is slightly lower relative to its key European peers this morning.
The NZD/GBP declined as the GBP was boosted by further positive UK data surprise, this time in the form of July retail sales. The NZD/GBP sits around 0.5160 this morning.
The NZD/AUD has been on an upward trend overnight, sitting as high as 0.8840 this morning.
We continue to see a higher cross over the medium-term with the NZD/AUD above 0.9000 by year-end.
There are no domestic data releases today.
Tonight’s offshore data releases are also of relatively 2nd tier importance.
For now, we see NZD/USD support at 0.8040 and resistance at the overnight highs of 0.8100.
---------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
It has been a wild ride for most currencies overnight. The USD has underperformed. The GBP has outperformed on its own merits. The CHF and JPY have benefitted from ‘safe haven’ appeal.
Overnight our risk appetite index (scale 0-100%) slipped from 70% to 67% as equity markets came under pressure across all regions. The Euro Stoxx 50 closed down 0.57% while the S&P500 is currently down 1.40%.
Corporate CDS spreads (proxies for credit spreads) have widened, as risk aversion has risen. Meanwhile, commodities continue to creep higher, led by precious metals. The CRB global commodity index is up a further 0.80%. The WTI oil price has pushed higher as tensions in Egypt escalate.
The catalyst for weak equity performance was the surge in US bond yields following the release of better-than-expected US jobless claims data (see Fixed Interest). The USD also surged, as the prospect of a recovering labour market raised the spectre of Fed ‘tapering’ sooner rather than later.
‘Risk’ assets currently seem caught in a dilemma where ‘good’ data is ‘bad’ for their performance. For now, they are responding to the negative prospect of less accommodative policy rather than the positive growth momentum the data imply.
Later this morning, subsequent US data (industrial production, Philadelphia Fed survey) fell below expectation. News of escalating political tensions in Egypt also undermined markets. US bond yields pulled back within previous ranges and the USD fell back. The USD index sits around 81.20 this morning.
The GBP benefitted from a continuation of recent positive momentum in UK data. July retail sales came in at 1.1%m/m (0.7% expected). After an initial post-data boost, the GBP/USD then benefitted from the weaker USD early this morning. It sits at 1.5640 currently.
Overnight, the CHF and JPY appeared to fall back on their reputation as ‘safe haven’ currencies during period of heightened risk aversion. Both currencies have gained around 0.90% relative to the USD over the past 24-hours.
The AUD was tossed around by USD moves overnight, trading a wide range between 0.9060 and 0.9180. It currently sits around 0.9140. Today the RBA’s Debelle is scheduled to speak, but the subject matter appears more academic than market moving.
Today, data is relatively thin on the ground offshore. Eurozone will release its trade balance and final reading of July CPI tonight. The US releases housing starts and ULC data.
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.