USD influence sidelined by local factors in many markets; China PMI may set scene for AUD direction

by Raiko Shareef

NZ Dollar

The NZD begins this morning unchanged from where it was 24-hours ago, just above the 0.8300 level.

The AUD and NZD staged promising rallies during our evening, but mostly gave these up in the early hours of this morning.

The NZD/USD continues to remain wedged between short-term resistance at 0.8380 and support at 0.8280.

It has held in this range since early last week, and looks to be fairly directionless.

The imminent release of US Fed Minutes has potential to test these parameters if they contain any surprises.

Alternatively the release of Chinese PMI numbers due out today (2.45pm NZT) could provoke a break in one direction.

Today sees most second-tier data releases out of NZ, including the ANZ job ads series, capital goods prices, and the ANZ-Roy Morgan consumer confidence measure.

Producer prices also due today may be of interest, with investors closely watching for signs of price pressure.

That said, this release is unlikely to have any serious bearing on the RBNZ’s course.

Lastly, Finance Minister Bill English is due to deliver a speech on public administration today, and will likely try to talk down the prospect of spending government surpluses.

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Majors

Apart from an outsized weakening of the CAD, major currencies are little changed from levels seen yesterday morning, as they await US Fed Minutes (8am NZT).

The USD/CAD depreciated by 1.0% overnight, allegedly triggered by a weak Canadian wholesale trade report. Wholesale trade fell by 1.4% m/m in December, much worse than the expected 0.4% decline. Some of the weakness can be attributed to the ice storm that hit eastern Canada late last year.

These data are normally not so market moving, but commentators suggested that the latest print served as a reminder of the softness in Canada’s growth and inflation outlook. This softness has led to the Bank of Canada adopting a dovish monetary policy stance.

The GBP was the strongest performer over the past 24-hours, rising 0.2% relative to the USD. This was despite an initial gap lower after data showed unexpected softening in the UK labour market. The UK’s unemployment rate rose to 7.2% in December, against expectations for an unchanged reading (7.1%).

However, the Bank of England recently moved away from tying itself to this one measure (unemployment rate), and now sees its policy outlook determined by a broader swathe of indicators. Last night’s release of the Bank of England’s February Minutes were similar in tone to the recent Quarterly Inflation Report. The GBP/USD trades around 1.6710 this morning.

Ahead of the imminent release of US Federal Reserve Minutes (from its Jan 28-29 meeting) the USD index has crept higher. It trades at 81.10 this morning, but still not far from its lows of the past few months.

HSBC releases the flash reading of its China PMI this afternoon. Consensus expects this to remain just below 50 (the level that delineates contraction and expansion). As always, any positive surprise would likely be AUD supportive. The AUD/USD trades at 0.9030 this morning.

Tonight, advance readings for German and Eurozone PMIs are due. US January CPI data and the February Philadelphia Fed survey of business will also be released.

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