Aggregate positive US Q3 earnings surprise sits at 4.9% and continues to underpin US$

by Kymberly Martin

NZ Dollar

While most of NZ celebrated Labour Day the NZD/USD opened the week with a slight upward bias. However, after touching above 0.8330 late last night it has fallen back to sit close to where it started the week, around 0.8290.

Trading across most currencies was fairly contained over the past 24-hours, as US bond yields also traded tight ranges. This saw the NZD sustain fairly unexciting trading on most crosses although a modest uptrend in the NZD/AUD was in play.

From 0.8640 at the start of the week the NZD/AUD now sits above 0.8660. With nothing scheduled on the domestic agenda today, any triggers for the cross will likely need to come from across the Tasman.

Scheduled remarks by RBA Governor Stevens and the NAB quarterly business survey this morning look to be the most likely candidates.

The NZD/EUR consolidated above the 0.6000 level over the past 24-hours.

We continue to see very strong support just below this level and would look to buy dips into the 0.5800-0.5900 window.

There is little on the domestic agenda ahead of Thursday’s RBNZ meeting to impact on the NZD, so offshore data/events will set the tone. In this regard there are no critical ‘risk events’ scheduled in the next 24-hours, though US retail sales and consumer confidence data tonight will likely garner some attention.

For now, we see NZD/USD support in the 0.8250-0.870 window.

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Majors

It was a fairly quiet, data-light start to the week. Currencies have mostly trade fairly tight ranges. The USD index is a little stronger at 79.30 this morning.

Our risk appetite index (scale 0-100%) stayed pretty steady around 70% as European and US equities provided fairly flat returns at the start of the week. Earnings delivery continues to provide an underpinning for US equities. With half of the S&P500 companies having now reported Q3 earnings, the aggregate positive earnings surprise sits at 4.9%.

Elsewhere, data showed September US pending home sales declined 5.6%m/m (0.0% expected). Rising mortgage rates and uncertainty surrounding the US government shutdown were cited as causes. However, the USD appeared unfazed, reaching toward 79.40 this morning before returning to trade around 79.30.

The GBP/USD lost a little of its lustre overnight. UK retail sales growth proved much weaker than expected in October according to the CBI Reported Sales survey. The headline balance fell to 2 from 34 (32 expected), the largest monthly fall in the balance since January 2005. The GBP/USD, that had been pushing toward 1.6210 ahead of the data, slipped back to trade around 1.6140 currently.

The AUD/USD both had a bit of upward momentum last night but peaked above 0.9620 before midnight. It then faded to trade around 0.9570 this morning. Key support for the currency now sits just above 0.9500. This morning, RBA Governor Stevens is scheduled to make opening remarks at a Sydney conference. Later the NAB quarterly survey of business conditions and confidence will be released.

Tonight, attention will return to the UK where consumer credit and mortgage approvals data will be released.

Tonight’s US data releases consist of retail sales, PPI and Conference Board consumer confidence. The impact of the US government shut-down may be apparent in the October confidence reading. As such, the market may be prepared to look through any softness.  All-in-all, it’s not too much to potentially jolt the market out of its current apparent lethargy.

All its research is available here.