by Raiko Shareef
NZ Dollar
The NZD was far and away the strongest performing major currency against the USD over Thursday, up 0.8% to 0.8380.
The NZD got an early boost from news that Fonterra lifted its milk price forecast by 35 cents to $8.65 per kg of milk solids. This was not surprising given very strong international prices, but is positive nonetheless.
Later in the morning, the currency received further support from trade, migration, and tourism data. The trade surplus was stronger than expected at $306mn, NZ gained a net inflow of 3,090 migrants during January, and visitor arrivals rose to 12% y/y.
While none of these outturns change our view of an already-strong NZ story, the NZD/USD appreciated steadily through the day.
This morning, the NZD/USD poked its head through short-term resistance at 0.8380, but has since returned to that level.
Today might see a test of the 0.8400 level, which has not been broken since mid-January. But given the subdued risk sentiment globally, we suggest that the bias here is for a downward correction.
Locally today, building permit and household credit data are due. But the focus will be on the 1pm release of the ANZ Business Outlook survey, which should affirm the sky-high confidence of NZ Inc. We will be closely watching the pricing intentions component, given that they rated an explicit mention in the RBNZ’s January statement.
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Majors
USD strength was pared back somewhat overnight, and traditional ‘safe-havens’, JPY and CHF, are among the best-performing majors.
Fed Chair Yellen played a straight bat in front of the US Senate early this morning. She reiterated that the asset purchase tapering will continue if the economy keeps tracking along as the Fed expects. When pressed on the weather, she noted that the unseasonable cold played some part in recent data softness, and that in weeks coming, the Fed will be watching carefully to see whether there was any underlying weakness. In all, these were very innocuous comments.
The US Dollar Index weakened over Thursday, and is 0.2% lower from this time yesterday. This comes despite stronger-than-expected US durable goods orders, which fell by 1.0% m/m in January, against expectations for a 1.7% fall. Core capital expenditure (non-defence, ex-air) was also stronger than expected, suggesting that the US is seeing some pickup in business investment.
Tensions around Ukraine remain elevated, as pro-Russian gunmen seized a regional parliament building, and Russian President Vladimir Putin reportedly put fighter jets on combat alert. Given this backdrop, the JPY and CHF benefitted from ‘safe-haven’ buying, rising 0.2% and 0.3% against the USD. They were the best performing major currencies, barring the NZD.
In Australia, the Q4 2013 private capital expenditure report was very weak. Capital expenditure fell by 5.2% q/q against expectations for a 1.0% fall. More worryingly, the first estimate for 2014-15 expenditure printed at $124bn, well below forecast, and implying that large falls in mining and manufacturing investment have failed to be offset at all by investment in other areas. The AUD dropped sharply on the release, but has rebounded, aided by support around the 0.8900 level. The AUD is just 0.1% lower for the day at 0.8960.
Today sees the monthly flurry of Japanese activity indicators (employment, inflation, industrial production), but we suspect global risk sentiment will have a stronger bearing on the JPY. Euro-zone inflation tonight will attract attention, in the run up to the ECB meeting next week. Also due for release is US Q4 GDP, which is expected to be revised lower from 3.2% to around 2.5%.
* German CPI printed slightly soft at 1.2% m/m vs. 1.3% expected.
* Euro-zone economic confidence better than expected at 101.2 vs. 100.7 expected.
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3 Comments
When will NZD achieve parity with Aus? April, after March hike?
MB - a rate hike is priced into markets. Markets look ahead, they reaction to surprises, not to knowns. The mover would be no hike, and there's zero chance of that. I sincerly doubt we'll see parity with the AUD this year, but if we did I'd be a big buyer of AUDs.
Yes, AUD quite good buying for kiwis right now really. We strong, they weak atm.
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