by Kymberly Martin
NZ Dollar
The NZD/USD has extended its gains overnight to sit at 0.8390 this morning.
A still fairly benign environment for risk appetite, post last week’s US payrolls data, is helping support the NZD.
The NZD is also benefitting from the market scouting around for currencies that are underpinned by strong fundamentals as it shuns the USD, for now.
Yesterday’s domestic data only confirmed that the NZD fits firmly in this category.
Yesterday’s QSBO was strong, consistent with GDP growth running around a 4% annual pace. That said, it was no stronger than anticipated, with momentum in the NZ economy now widely recognised.
Overnight, the NZD/USD found resistance at the 0.8430 level that marked the currency’s highs in late September last year. A break of this level would open the way for a push up toward the October highs (around 0.8550).
Momentum currently favours the currency and trading levels are within our short-term fundamental ‘fair value’ range (0.8300-0.8800). Still, as already mentioned, the NZ ‘good news’ story is now well known. Significant upside surprises will likely be increasingly difficult to muster.
In coming weeks the risks are likely tilted toward (i) the RBNZ not delivering on a January rate hike that is still priced as a 35% chance by the market (ii) the delivery of the US January payrolls report that shows up the December report’s softness as a bit of an aberration. Combined, these factors could see sentiment move away from the NZD/USD.
The NZD/AUD pushed up to new cycle highs overnight, touching above 0.9360 early this morning. This is its highest level since late 2005. While momentum still clearly favours the cross we believe valuations are now stretching the well-known divergence in Trans-Tasman fundamentals.
Today, NZ food prices will be released along with the RBNZ weekly mortgage approvals.
------------------------------------------------------------------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
------------------------------------------------------------------------------------------------------------------
Majors
Despite some volatility, the USD index trades at a similar level this morning. Over the past 24-hours the AUD and JPY have been the weakest performers.
Overnight, risk appetite remained fairly solid as equities provided positive returns.
The Euro Stoxx 50 closed up 0.20% while the S&P500 made back its previous day’s losses, up 0.90% currently. Global commodity prices continue to claw their way off recent lows. The broad CRB commodity index rose a further 0.25% overnight.
While the NZD was well-supported last night, the AUD was not so fortunate. A downtrend set in from early evening, with the AUD/USD declining from above 0.9040 to trade around 0.8970 this morning. Locally, there is not much scheduled on the AU agenda today as the market awaits the AU employment report tomorrow.
The JPY also weakened overnight, fully reversing the previous day’s gain. The USD/JPY now trades back at 104.00. Ultimately we see further JPY weakness ahead as the BoJ announces further stimulus measures in the backdrop of the US Fed that is in the process of reigning in its stimulus. We see the USD/JPY at 111.00 at year-end.
The GBP/USD was on the ascendancy overnight. It briefly dipped after the release of UK data showing CPI at 0.4%m/m in December (0.5% expected). Still, the fall proved short-lived. The GBP/USD regained its composure to trade around 1.6450 this morning.
Tonight, the US Empire Manufacturing survey will be released along with the Fed’s Beige Book survey of business. Fed member Evans is also scheduled to speak.
No chart with that title exists.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.