by Kymberly Martin
NZ Dollar
The NZD/USD sits a little higher this morning, at 0.8260, having traded as high as 0.8300 overnight.
Broad risk appetite improved overnight, reflected in stabilising emerging market currencies and positive equity market returns.
The NZD was a beneficiary along with the AUD. The NZD/USD was on the ascendancy early in the evening, before losing steam in the early hours of this morning.
It now trades below its intra-night highs, at 0.8260 currently.
Today, sees the Reserve Bank release data on high-LVR lending for December. We wouldn’t be surprised to see another low-ball result for the month.
This is especially so with the RBNZ now exempting lending for new-builds.
In addition, exemptions by way of the existing government-sponsored Welcome Home scheme, which recently relaxed its thresholds, look to be gaining in favour.
On the crosses, the NZD has strengthened against it European peers and the JPY. Relative to the AUD the NZD has been range-bound if volatile over the past 24-hours. It is consolidating just below 0.9420 this morning.
Yesterday, NZ Finance Minister, English, was quoted as saying the NZD is overvalued relative to the AUD. This is certainly the message from our fundamental model that sees the short-term ‘fair-value’ in a 0.8500-0.8700 range.
Today there are no first tier data scheduled on either side of the Tasman.
The market will likely be looking ahead to the substantial event risk tomorrow morning. The US Fed meets at 8am (NZT) and the RBNZ at 9am (NZT).
We anticipate the RBNZ will not raise rates at this meeting but set the scene for a steady rate hiking process from March. A ‘no hike’ move this week could see a knee-jerk dip in the NZD/USD as the market still prices around a 40% chance of a 25bps hike.
Near-term NZD/USD support is seen at 0.8220 while resistance is eyed at the overnight highs around 0.8300.
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Majors
Overnight, many emerging market currencies found reprieve. The NZD and AUD outperformed while the JPY underperformed.
Risk appetite generally improved overnight as emerging market currencies found a footing.
The Indian central bank unexpectedly raised rates and the Turkish equivalent hinted it may be necessary to raise rates to rein in inflation. Our risk appetite index (scale 0-100%) has rebounded to 55% from below 50% at the end of last week. Equity markets put in a solid performance with the Euro Stoxx 50 up 0.8% and the S&P500 currently up 0.60%.
Improved risk appetite was also reflected in developed market currency performance. The JPY underperformed as it lost its ‘safe haven’ appeal. The USD/JPY sits at 102.90 this morning.
The AUD/USD was the star performer over the past 24-hours. It was given a boost yesterday afternoon by the stronger than expected NAB business survey. Both confidence (6 vs. 5 exp.) and conditions (4 vs. -3 exp.) beat expectations. The AUD was further supported by improved risk appetite overnight. The AUD/USD touched 0.8820 intra-night before returning to trade at 0.8780 this morning.
Meanwhile the USD index was jostled by US data releases. Early this morning data showed an unexpected decline in December durable goods orders (-4.3% vs. 1.8% expected). The USD fell despite most of the drop in durable goods being concentrated in the volatile commercial aircraft component. Soon after, the US consumer confidence index came in above expectation (80.7 vs. 78.0) helping the USD index to rebound. It trades at 80.60 currently.
The GBP/USD experience some heightened volatility overnight around data releases, despite UK Q4 GDP coming in line with expectation at 0.7%q/q. This translates to a very respectable 2.8%y/y growth.
Tonight, it will be all eyed on the US Federal Reserve. We, along with consensus, expect it to announce a further $10b/month reduction in asset purchases. The market may be more focused on additional ‘forward guidance’ at what will be Bernanke’s final meeting as Chairman.
Elsewhere, UK house price data will be released.
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3 Comments
"Soon after, the US consumer confidence index came in above expectation (80.7 vs. 78.0) helping the USD index to rebound. It trades at 80.60 currently."
80.60 what? 80 bushells for a dollar?
I was wondering when someone was going to mention the US house sales data for December.
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