by Kymberly Martin
NZ Dollar
The NZD was one of the strongest performers overnight, in fairly benign markets. It trades at 0.8580 this morning.
In the absence of domestic data releases yesterday the NZD/USD traded a fairly steady sideways path through to the early hours of this morning. It then squeezed higher through 0.8560, to trade at 0.8580 currently.
The NZD is also stronger relative to its key European peers. The NZD/EUR attempted to break above 0.6220 early this morning, its highs since November last year. However, the bid proved unsuccessful and it has returned to trade around 0.6200 currently.
The NZD/AUD traded a broad range overnight. From around 0.9370 last evening it slipped toward 0.9330 early this morning before recovering to trade at 0.9360 currently.
Our forecasts continue to see the cross broadly in a 0.9200-0.9400 range in coming months. We believe current levels already price in much of the diverging fundamentals on either side of the Tasman.
We believe probes in the NZD/AUD above recent peaks in the vicinity of 0.9500, are unlikely to be sustained. A scheduled speech by RBA Governor Stevens today (4.30pm NZT) has potential to impact on the cross.
Today the RBNZ will release its latest LVR and mortgage approvals data, both closely watched indicators of the NZ housing market. Near-term we see NZD/USD support at 0.8540. Resistance is eyed at the pre-US FOMC meeting highs, around 0.8640.
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Majors
Overnight, in the backdrop of mixed US data releases, and continued simmering tensions surrounding Ukraine, equity markets nevertheless managed to eke out positive gains. The Euro Stoxx 50 closed up 1.4% and the S&P500 is currently up 0.45%.
Last evening the German IFO survey for March was released. This showed the current assessment improved to 115.2 (from 114.4) but forward-looking expectations decline to 106.4 (108.3 previously). It suggests steady rather than spectacular recovery in the German economy.
The EUR started on a downward path and was also buffeted by headlines speculating on the ECB’s need to do more to address deflationary pressures. At one point the EUR/USD dipped below 1.3760 before clawing its way back to trade at 1.3840 this morning.
The GBP strengthened overnight. Last night, UK data showed February CPI in line with expectation at 1.7%y/y. UK house prices were seen growing a little more strongly than expected at 6.8%y/y in January. The GBP/USD climbed a fairly steady path from around 1.6490 last evening to 1.6540 this morning.
The AUD/USD traded a fairly steady path sideways, just above 0.9140, for much of the night. Early this morning it broke through key resistance at 0.9150, to trade around 0.9170 currently. This is its highest level since late November last year.
Today, RBA’s Lowe and Governor Stevens are scheduled to speak. The latter’s speech is on Australia within the global economy at a conference in Hong Kong. The RBA’s Financial Stability Review is also due for release today.
Tonight, the Fed’s Plosser and Bullard are scheduled to speak. US durable goods orders will also be released.
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