by Kymberly Martin
NZ Dollar
The NZD/USD trades higher, at 0.8300, this morning, boosted by Friday night’s US payrolls report.
The US payrolls report determined most currency’s fates on Friday night. The softer-than-expected outcome resulted in a knee-jerk fall in the USD index (see Majors).
The NZD benefitted along with most of its peers. It was also supported by buoyant risk appetite induced by speculation the Fed will be in no great hurry to taper its asset purchases following the disappointing data.
The NZD/USD was boosted off its intra-night lows around 0.8210, to end the week just above 0.8300. It is now trading toward the upper-end of recent ranges with key resistance eyed at 0.8330. Near-term support is seen at 0.8230.
The NZD strengthened against its European peers but was weaker relative to the AUD and JPY. Yet again the NZD/GBP performed a masterful escape from the clutches of the 0.5000 level, climbing to close the week at 0.5040.
The NZD/AUD subsided as the AUD was a key beneficiary of improved risk appetite on Friday night. IMM data shows speculative positioning is still notably short the AUD while modestly long the NZD.
The AUD is therefore relatively well positioned to benefit from shifts in sentiment away from the USD. The cross ended the week at 0.9220, around 1.0% down from its highs earlier in the week. Key resistance remains at 0.9310 while support is eyed at 0.9150.
Domestically there are no data releases scheduled today, although REINZ housing data is expected sometime this week.
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Majors
Friday night was all about US payrolls. The USD weakened against most of its peers while the AUD was a key outperformer.
The highly anticipated US payrolls number came in well below expectation (74k vs. 197k expected). It was probably a bit of a rogue number, largely explained by unseasonably severe winter weather last month. However, the market’s response was abrupt. The USD index gapped lower from above 81.10 to end the night around 80.60.
Ahead of the report, the most recent IMM data showed an extension of speculative USD long positioning. USD longs (vs. G10) reached their highest level since September 10 last year, making the USD particularly vulnerable to the data disappointment.
Elsewhere, equity markets were underpinned by generally buoyant risk appetite following the release. Our risk appetite index (scale 0-100%) has crept up to 71% from around 65% at the start of the year. The Euro Stoxx 50 closed up 0.45% and the S&P500 up 0.2%.
Key beneficiaries of USD weakness were the SEK, AUD and JPY. In contrast to the USD, speculative positioning remained heavily short the AUD ahead of the payrolls release according to IMM data. The AUD/USD was spurred from around 0.8890 to a close the week just below 0.9000. AU credit card, home loans and ANZ job advertisements data will be released today, although all are relatively 2nd tier data.
On Friday night, UK production and construction data releases for November were slightly disappointing (industrial production 0.0%m/m vs. 0.4% expected). The GBP/USD gapped lower toward 1.6400 on the releases but soon reversed the move after the US payrolls data. The GBP/USD ended the week at 1.6480.
It will be a quiet start to the data week offshore with nothing of note scheduled tonight. Highlights later in the week will be the release of the Fed’s Beige Book, Empire Manufacturing, Philadelphia Fed and University of Michigan confidence survey. Fed speakers are also out in force.
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