by Kymberly Martin
The NZD/USD has slipped a little over the past 24-horus to sit around 0.8070 this morning.
Yesterday’s BNZ Performance of Services Index confirmed a now familiar story.
The domestic economy is going from strength to strength. At 58.1, the PSI reading was not quite as high as last week’s PMI (59.5), but told of broad-based strength.
The PSI adds to numerous signs that the economic expansion is now accelerating. Indeed, the chance of getting 5% GDP growth over the coming 12 months cannot be taken lightly.
The NZD/USD started the week on the front foot, but was unable to maintain upward momentum overnight. The NZD/USD was unable to push above 0.8160, dropping back to sit around 0.8070 currently.
With positive momentum now favouring the NZD/USD we continue to see a convincing break above the key 0.8130 resistance level as paving the way for a bounce back to 0.8250.
The NZD drifted slightly lower relative to its key European peers overnight. As the EUR was given a boost by Bundesbank comments, the NZD/EUR slipped from 0.6110, to around 0.6050 this morning.
The NZD/AUD has crept a little higher to sit around 0.8850 this morning. Key resistance for the cross remains at the early-August highs of 0.8930.
Ultimately we see a push beyond this level with the cross above 0.9000 by year-end.
For today, the fortunes of the cross may be influenced by the release of RBA minutes (see Majors), in the absence of any key domestic data releases.
---------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
It has been a fairly quiet start to the week with little data of note. The AUD and NZD were the softest performers over the past 24-hours but even here losses were modest.
Despite data being rather thin on the ground, the most notable move in overnight markets was a further push higher in US benchmark bond yields. US 10-year yields, at 2.89%, are now at their highest level since mid-2011.
The Euro Stoxx 50 declined by 1.1% while the S&P500 is currently down 0.40%. But our risk appetite index (scale 0-100%) is still fairly stable at 65%.
In this backdrop the USD traded without direction between 81.15 and 81.40, sitting around 81.25 currently. The index remains well off its early-July highs of around 84.60.
Overnight, the EUR/USD briefly surged higher after comments from the German Bundesbank. In its monthly report it stated that the ECB’s recent ‘forward guidance’ does not rule out rate increases if greater inflation pressures emerge. The EUR/USD was spurred from 1.3330 to above 1.3370 on the comments, but has since slipped back to sit around 1.3340 this morning.
UK data overnight showed a 1.8%m/m dip in house prices in August. However, it was explained as nothing more sinister than a summer holiday dip. The GBP took the data in its stride, pushing up from 1.5620 to sit around 1.5660 currently. The challenge for the GBP/USD will now be to push beyond the mid-June highs around 1.5750.
The AUD/USD, which had been bobbing around above 0.9200 yesterday, slipped to 0.9120 overnight. The highlight for the currency today will be the release of RBA August minutes. These may help to clarify some apparent ambiguities between the RBA’s post-meeting statement and the subsequent Monetary Policy Statement.
Both we, and the market, see the RBA as nearing the end of its easing cycle. The market still prices 20bps of rate cuts by early next year. Our NAB colleagues see a final 25bps rate cut in November this year.
Elsewhere, there is little on the global data agenda. Today, the Japanese all activity index will be released. The market will likely remain focused on the key event for the week, Wednesday night’s (Thurs morning NZT) release of US Fed minutes.
Event Calendar:
20 August: AU RBA minutes; AU RBA minutes; US Chicago Fed;
21 August: NZ migration; NZ credit card spending; UK public sector borrowing; US home sales;
22 August: CH HSBC Flash PMI; EU Flash PMIs; US jobless claims; US house prices; US Jackson Hole Summit;
23 August: EU German GDP; UK GDP; US new home sales.
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.