by Kymberly Martin
NZ Dollar
The NZD sits around 0.8320 this morning, having traded as high as 0.8360 overnight.
The NZD gained a boost yesterday afternoon, along with the AUD, on the back of better than expected China trade data.
Overnight, in fairly benign markets the NZD/USD extended gains, rising above 0.8360. However, it was unable to sustain the push higher and has returned to sit at 0.8320 currently.
Key near-term resistance remains just above the 0.8400 level. A push above this level would open up tactical selling opportunities, in our view.
Today’s domestic data release (BNZ PMI) may be sufficient to sustain upward momentum in the NZD/USD. There is little to suggest the data will not be consistent with the strong expansion shown in December (56.4).
On the crosses the most notable overnight move was on the NZD/GBP. The GBP was bumped into ascendancy after the release of the BoE’s inflation report. The NZD/GBP subsided from overnight highs above 0.5090 to sit below 0.5020 currently.
The NZD/AUD sits little changed, just above 0.9210 this morning, having touched overnight highs around 0.9240.
Today, the AU employment report will likely be an important determinant of the crosses fate. Further deterioration in the AU labour market is already expected by consensus.
But a disappointing report could still some NZD/AUD bounce. Resistance should be encountered approaching 0.9280. Support is eyed in the 0.9140-0.9170 window.
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Majors
The Bank of England released its quarterly Inflation Report overnight, in which it sharply upgraded its UK growth forecasts. The economy is expected to expand by 3.4% in 2014 (up from 2.8%), and 2.7% in 2014 (up from 2.3%). Despite this, the tone was distinctly dovish on rates, but the GBP/USD nevertheless appreciated.
Investors likely wagered that the Bank will struggle to hold short-term interest rates low. The GBP/USD is up nearly 0.8% for the session, at 1.6580.
Staying in the Northern Hemisphere, the EUR/USD tumbled on weaker-than-expected factory data, as well as some dovish comments from ECB Board Member Benoit Couere. He noted that the Bank is “very seriously considering” negative deposit rates.
ECB officials have made a habit of waving various policy sticks over the past few months, with varying degrees of success. This particular pot-shot saw the EUR/USD fall by 0.5% to 1.3570.
The AUD and NZD both appreciated yesterday afternoon on the back of Chinese trade figures that were more than twice as high as market expectations. While we take the outturn with a pinch of salt (given Lunar New Year distortions), it was still a good outcome. Both currencies rose by 0.4% on the release, but have since given up those gains.
Today, Australian labour market data will be the key focus for both currencies. Our NAB economists are picking the unemployment rate to continue rising to 5.9%, from 5.8% previously. This is in line with market expectations.
Tonight, retail sales data will be released in the US. Also Fed Chair, Yellen, will be back in the hot-seat delivering the Fed’s report to the Senate. However, she is likely to repeat much of the non-controversial comments of her delivery to the House earlier in the week. In that case it should not stir market volatility.
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