by Kymberly Martin
NZ Dollar
The NZD/USD trades a little lower around 0.8240 early this morning.
Overnight, all eyes were on Europe as the ECB and BoE announced rate targets. The result was a fair amount of volatility in European currencies.
However, the NZD/USD and AUD/USD managed to steer clear of most of the volatility, trading fairly steady sideways paths.
The NZD/USD has dribbled a little lower this morning and currently sits very close to the 50-day moving average at 0.8243. Technically this level may be of interest to some traders.
Otherwise the NZD/USD remains firmly within the broad 0.8120-0.8320 range it has traded over recent weeks.
Yesterday morning’s release of US Fed Minutes, nudged the NZD/USD a fraction lower, but provided nothing to threaten its broad range.
As might be expected, the NZD/EUR suffered some volatility at the hands of the ECB meeting overnight. From 0.6060 ahead of the meeting the cross spiked briefly toward 0.6100, before returning to trade just above the lower level this morning.
Meanwhile, the NZD/GBP drifted lower as the BoE left rates and asset purchases unchanged but gave little else away about its intentions. This cross now sits just above the 0.5000 level.
Domestically, NZ QV house prices are still expected to be released by week end. However, domestic factors will be very much in the back seat over the next 24-hours as the market awaits and dissects the December US payrolls report.
Given the strength in Wednesday’s ADP report the market is likely now tilted toward expecting a strong number (consensus 200k). Therefore the greater knee-jerk market response (USD weakness) would likely result from a softer than expected outcome.
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Majors
Despite a bit of volatility around last night’s European Central Bank meetings, most major currencies currently trade not far from where they were yesterday morning.
Yesterday morning’s December US Fed Minutes prompted only limited response from the market, with a knee-jerk tick higher in the USD. However, subsequent trading was fairly placid ahead of the ECB and BoE meetings last night. Then it was all eyes to Europe.
First up was the Bank of England, providing little surprise with its decision to leave rates at 0.5%, and asset purchase target unchanged. The GBP/USD very briefly spiked higher. But it proved short-lived and the market’s attention moved to the ECB’s announcement. The GBP/USD sits at 1.6460 this morning.
The ECB provided more for the market to chew on. It provided enough hints for the market to speculate on the possibility of further stimulus measures, including QE. The EUR/USD responded with harsh volatility. On the initial ‘no change’ decision on rates the EUR/USD spiked above 1.3630. Later, as President Draghi was questioned the EUR/USD slipped back to 1.3550. It has settled around 1.3580 this morning.
In other markets, equities provided modest negative returns in Europe, and are currently fairly flat in the US. The broad CRB global commodity index declined a further 0.80% overnight to be close to its lows since mid-2012.
There was also a notable further decline in the oil price. The WTI oil price now sits at $91.90, its lowest level since May last year. Supply issues appear to be contributing. A US government report showed crude production climbed to the highest level since 1988.
The AUD/USD sits a fraction lower this morning at 0.8890. We continue to watch key support for the AUD/USD at the 0.8820-0.8840 level that marked its lows in August and December. Today, AU HIA new home sales data will be released.
Tonight, UK industrial production data will be released. However, the main focus will be on US employment reports. Both payrolls data and the unemployment rate will be delivered. Official consensus is for a 200k payrolls release. However, after Wednesday’s strong ADP report expectations are likely tilted towards a higher number.
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