by Kymberly Martin
NZ Dollar
The NZD/USD sits a little lower this morning at 0.8220.
Yesterday’s REINZ house price data did not provide any shocks to the market. The Stratified Home Price Index sustained a 9.9% rise in October.
There was little else on the domestic agenda to drive the currency yesterday, although the NZD/USD traded with a downward bias, to sit just above 0.8220 this morning.
The NZD/GBP gapped higher late last night after the release of softer-than-expected UK inflation data. But the cross found resistance at 0.5190, returning to trade at 0.5170 this morning.
Last night the NZD/EUR declined, as the EUR continued its recent rebound. The NZD/EUR now sits at 0.6120. A band of support is seen between 0.6070 and 0.6090. A break of this level would open the way for a pullback to 0.6000.
The NZD pushed on a little higher relative to the AUD overnight, sitting at 0.8850 currently. We see relative fundamentals continuing to favour the NZD, forecasting the NZD/AUD peaking above 0.8900 early next year.
Today, the domestic focus will be the RBNZ’s Financial Stability Review. This should provide some discussion of the recently implemented LVR mortgage restrictions.
For now, NZD/USD support remains at 0.8190. A break of this level would open the way for a much deeper pull-back in the NZD/USD. Resistance is eyed at 0.8280.
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Majors
Markets were somewhat directionless following Monday’s US holiday. The EUR outperformed, but the USD was stronger relative to most of its other key peers.
Trans-Atlantic equity markets took a bit of a breather overnight. The Euro Stoxx 50 closed down 0.6%, while the S&P500 is currently down 0.3%. Broad global commodity indices tried and failed to push on higher.
The WTI oil price continues to consolidate just below $95, well down from its September highs above $110. The USD index was on the front foot during the evening, rising to above 81.40 before falling back to trade around 81.10 this morning.
The EUR continued its recent rebound overnight. From around 1.3380 it now sits just below 1.3440. The market may have reduced expectations for further ECB easing after revelation of the lack of unanimity over last week’s rate cut decision. This may have helped curtailed the EUR’s recent fall.
The GBP/USD gapped lower last night after the release of UK CPI data (0.1%m/m vs. 0.3% expected). This saw the annual rate of inflation fall to 2.2%y/y from 2.7% previously. But the sharp fall was soon reversed as the GBP/USD clawed its way back up to 1.5920.
Tonight, UK labour market data and the Bank of England’s Inflation Report will be released. Recall the August report saw the implementation of ‘forward guidance’. The MPC signalled it anticipated keeping rates ‘on hold’ until the third quarter of 2016 when the unemployment rate would fall to 7.0%. So far, the labour market has been a little stronger than predicted so the market will be alert to any changes to the BoE’s forecasts or guidance today.
For now, the GBP/USD sits precariously above crucial support at 0.5900.
The JPY weakened overnight. The USD/JPY touched 99.80 before returning to sit at 99.60 this morning. Looking back over the past few months, the USD/JPY has essentially been consolidating in a sideways range between about 96.00 and 101.00. A push higher in the USD/JPY would likely require further announcements of monetary policy easing from the Bank of Japan.
The AUD/USD was on a downward track overnight. The path was established yesterday afternoon after the release of the NAB business survey. After surging higher in September (following elections), the business confidence index fell back significantly in October, to +5 from +12.
However, the reading is still in line with the series long-run average since 1989. The pull back in confidence suggests businesses may have reassessed their expectations for the outlook given the continued weakness in actual conditions. Business conditions were unchanged at -4 points in October.
The declining optimism saw the AUD/USD gap lower. Downward momentum overnight then carried the AUD/USD to below 0.9300 this morning. Today, the key AU releases will be the Westpac consumer confidence survey and the AU wage cost index.
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