by Kymberly Martin
NZ Dollar
The NZD/USD has traded a 0.8270 to 0.8320 range over the past 24-hours, returning to sit at a similar level to yesterday morning.
It trades at 0.8280 at present, ahead of the release of the December US Federal Reserve Minutes (8am NZT).
Last night, the biggest event for currency markets was the release of the US ADP employment report. Surprising to the upside, it boosted the USD.
However, as anticipated, the NZD was also quite well supported as risk appetite remained buoyant.
After some post-release volatility the NZD/USD moved up toward 0.8320 in the early hours of this morning before returning to trade around 0.8280 currently. All eyes are now on the Fed Minutes.
The most notable move on the crosses overnight was some softening of the NZD/GBP in the backdrop of a broadly stronger GBP. This cross is once again moving down toward the crucial 0.5000 level, but it is unlikely to break through without a fundamental catalyst.
Key events in the UK tonight will be the meeting of the Bank of England and the release of UK trade balance data.
Domestically, NZ building permits will be released today along with the latest print on the ANZ commodity price index. QV house price data is also expected by week end.
Key levels to watch today will be 0.8320 on the upside for the NZD/USD, while support is seen at 0.8250. For the NZD/AUD, the market will be watching to see if the cross can break through the mid-December highs just above 0.9300. Early this morning the cross was approaching this level.
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Majors
The USD was generally stronger after an upside surprise on the US ADP employment report. The GBP also outperformed.
Overnight, equity markets were fairly range-bound with both the Euro Stoxx 50 and the S&P500 almost flat. However, our risk appetite index (scale 0-100%) remains fairly robust at 69%. Commodity prices were generally weaker. The broad global CRB commodity index declined 0.5%, extending its losses from late December.
The US ADP employment report proved the data highlight of the evening. It delivered a strong result (238k vs. 200k expected). While the report is not always a useful leading indicator to the payrolls report, it does reduce the risk of a downside surprise in tomorrow night’s data. The USD index was a beneficiary, rising to sit above 81.10 this morning, its highest level since mid-November.
It was difficult to pinpoint the precise catalyst for GBP/USD strength overnight. Certainly there was no particular data or official commentary to drive the outperformance. However, selling of the EUR against the GBP appears to have helped. The EUR/GBP broke below its early-December lows to trade at its lowest level in a year. Meanwhile, the GBP/USD pushed on up to 1.6460.
The EUR was on a bumpy path lower for most of the night. Eurozone retail sales data for November were actually stronger than expected (1.6%y/y vs. 0.3% expected). But data also confirmed the malaise in the Eurozone labour market remains. The unemployment rate remained elevated at 12.1%. The EUR was also a natural casualty of USD strength. The EUR/USD sits just above 1.3570 this morning.
The AUD held up fairly well against USD strength. It sits at a similar level to yesterday morning, around 0.8910. Key support for the AUD/USD remains in the 0.8820-0.8840 window that marked the lows in August and December. Today AU retail sales data and building approvals will be released, both for November.
Shortly (8am NZT) the Fed’s December Minutes will be released. These will likely be scanned by the market to see whether there was a tight consensus behind the Fed’s decision to begin ‘tapering’ in December.
Tonight, the focus will return to Europe where both the Bank of England and ECB are expected to announce targets. No changes to cash rates are expected, but the market is likely looking for the ECB to offer some hints of other measures to further stimulate the region’s economy. Growth remains lacklustre and inflation well below the ECB’s target. Eurozone confidence indicators will also be released tonight along with German industrial production.
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2 Comments
When the NZ$ is at parity with the Aus$ we will start importing Aussie Apples , Beef and Lamb becasue it will be cheaper than our domestic produce .
It will create numerous arbitrage opportunities.
Parity with the Aussie will be a game changer because we have become complacent riding the advantage of a cheaper currency .
Hell , we could even see airfreighted fresh fish from Australia on suoermarket shelves
Don't forget THE GILT DRAGON OMEN ::
The "Vergulde Draeck" Omen(The "Gilt Dragon" Omen)
A Foreign Exchange Rate condition that will announce then end of the US Dollar
Abstract
There is an ongoing collapse of the US Dollar (USD) against most of the world's fiat and quasi-fiat currencies. This collapse in value has been taking place for at least 40 years. As a long term phenomena the "USD decline" has been ongoing since the 1960s on a selective basis.
There have been some emergent trends that will accelerate the collapse due to the global set of dependencies on the USD and USD denominated assets.
The Quadruple Witching Condition
The Math
Currencies : ({Australia: AUD; Canada: CAD; NZ: NZD; Switzerland: CHF})
(Maths) : "=>" (alternately "= | >" or "≥") is "Greater Than or Equal to"
[Binary] function (Gilt Dragon)
{
and CAD => USD;
and NZD => USD;
and CHF => USD;
} returns True for "Duration"
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