by Kymberly Martin
NZ Dollar
Good morning all and once again the open has the NZD trading marginally above the 0.8300 level.
With understandably greater focus on the performance of the AUD post their Q4 CPI print the NZDUSD has respected recent resistance short of 0.8350 while sustaining a well-supported bias closer to 0.8300 overnight.
Across the board it’s a night of mixed cross rate performance, with NZDGBP pressured due to the outperformance of the GBP (see Majors section).
The NZDAUD also retreated from north of the 0.9450 level yesterday to challenge the 0.9380 level in trade after the Australian CPI. Contrary to these two crosses, NZDCAD continued to advance as the CAD remained pressured.
On the day we have updates on several monthly surveys. Our own collaboration with Business NZ and their PMI is due at 10:30am(previous 56.7) while at 1:00pm the Consumer Confidence Index from the ANZ prints (previous 129.4). The monthly Job Adverts as provided by ANZ prints at 10:00am.
Strong (staunch) numbers from all or any of the above surveys won’t really surprise and so it is with some caution we open the book today.
After failing to push onwards post our riper CPI print of Tuesday traders might well probe the support levels of the NZD, so we expect resistance at 0.8325 to contain and turn our attention on support pegged in the 0.8250/0.8275 window.
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Majors
Yesterday, well following New Zealand’s small upside surprise to its Q4 CPI print on Tuesday, Australia’s surprise was even greater.
The Q4 CPI rose +0.8% q/q and by 2.6% y/y from a respective +1.2% and 2.2% in Q3. This compared to forecasts of +0.4% and 2.4%.
The weighted core measures saw more significant gains, rising to 0.9% q/q and 2.6% y/y against consensus of +0.6% and 2.3%. Our research team notes that Tradeable inflation rose 0.7% q/q; below that of the 0.8% q/q rise in non-tradeable inflation, so they cannot point to the lower AUD causing specific shocks.
Looking ahead to the early February meeting of the RBA, with inflation now in the upper half of the RBA’s 2-3% target range (and above the RBA’s 2.25% core forecast for Q4), we might anticipate a change in the RBA’s post-meeting Statement that most recently has said the inflation outlook ‘affords it scope to ease policy further if required.’
In London trade the AUD continued to squeeze out “short” trading accounts, though it failed shy of the US 89cent level and has retreated since to open this morning just below 0.8850.
Getting plenty of attention was a surging GBP, spurred by the release of the ILO Unemployment rate. The November update printed at 7.1% vs. expectations for 7.3%.
The release of BOE minutes showed not surprisingly a unified table voting 9-0 to maintain interest rates and the Asset Purchase Target at unchanged levels. In subsequent commentary in light of the Unemployment report attention has been notes from the Minutes that showed there was no immediate need to adjust policy if a 7% jobless threshold was reached and the table did not have any discussion on lowering the jobless threshold.
Yesterday the BOJ left policy settings unchanged in an uneventful update for markets, though as anticipated the BOC in their policy update spurred a weakening of the CAD with dovish overtures in their deliberations overnight.
Looking to the day ahead in Asia we have South Korean GDP (their Q4 preliminary reading) to monitor as well as the Flash update from HSBC of Chinese PMI. For the latter surveys point to expecting a 50.3 outcome, a slight retreat on the previous update.
Tonight across Europe there are also Flash PMI updates, steady or marginally improved readings seems the consensus though that’s from the same group of offshore analysts that got this week’s ZEW updates horribly wrong on Tuesday night.
The US will get some analysts attention with the updates on Initial Jobless Claims and Existing Home Sales – a welcome respite for commentators that have otherwise been focused on the reporting season from Wall Street.
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