by Kymberly Martin
NZ Dollar
The NZD was the star performer over the past 24-hours. It sits around 0.8670 this morning.
Yesterday morning brought another strong batch of NZ trade figures. The $818m monthly surplus was the highest ever February trade surplus. It was above market expectations of $600m, as exports surprised on the high side. Exports were 17% higher in February compared to the same month a year ago. This remains a story of booming primary product returns as it has been for many months now. The annual trade surplus increased to $649m.
This provided a solid base for the NZD/USD. The currency then pushed higher during the evening, assisted by comments from RBNZ’s Spencer, suggesting that NZ exporters have adjusted to the high exchange rate. The general tone of the Deputy Governor’s speech was also fairly hawkish. His opening line said; “The Reserve Bank expect to tighten monetary policy substantially over the next year in response to emerging inflation risks”.
The NZD/USD consolidated its gains early this morning to trade around 0.8670 currently. This is aligned with the currency’s peak in April 2013. Above that is the post-float peak in the NZD/USD of 0.8840, reached in August 2011.
The NZD has pushed higher on all the crosses. The NZD/JPY is now well-recovered from its early-year risk aversion-inspired plunge. It sits at 88.60 this morning, its highest level since late 2007. Meanwhile the NZD/EUR has been spurred to its highest level since last May, sitting above 0.6300 this morning.
Trading in the NZD/GBP was less of a one-way bet overnight. The cross took a sharp fall late last night after the release of stronger-than-expected UK retail sales data. Still this cross sits somewhat higher this morning at 0.5220.
The NZD/AUD pushed toward 0.9400 overnight, but failed in its bid, returning to trade around 0.9370 this morning. We believe a level of the cross in the low 90s is more consistent with relative fundamentals rather than a push toward new highs above 0.9500. There are no scheduled data releases on either side of the Tasman today
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Majors
The USD index was fractionally stronger overnight, but the key outperformers over the past 24-hours were the NZD and NOK.
Overnight, equity markets were fairly directionless. There seemed to be little enduring impact from the announcement yesterday morning that the capital plans of five banks, including Citigroup, had failed US Federal Reserve stress tests. The S&P500 is currently close to flat.
Meanwhile the CRB global commodity index continues its recent rebound. It sits 0.80% higher this morning, likely helping underpin ‘commodity-linked’ currencies such as the CAD and AUD.
The USD index showed a little volatility overnight, but sits a little higher this morning, helped by a soft EUR. Overnight, US data showed the latest reading of US Q4 GDP at 2.6%q/q ann., close to expectation. Pending home sales for February were slightly below expectation (-10%y/y vs. -9% expected). The USD index sits around 80.10 this morning.
The NOK surged higher overnight. The Norges Bank left its cash rate at 1.50% as widely expected and left its rate projections unchanged. It anticipates gradually hiking rates from mid-2015. However, there were accompanying comments from the Bank that there was potential for CPI to be slightly higher than previously expected. The NOK has risen 0.85% relative to the USD over the past 24-hours to trade at 6.000 currently.
The GBP received a shot in the arm from the release of UK retail sales data overnight. UK headline retail sales rose by 1.7% in February, comfortably beating market expectations for a 0.5% increase. The GBP/USD gapped from 1.6560 to 1.6640 on the release. It now trades around 1.6600.
Meanwhile the AUD/USD has continued its steady push higher overnight. It trades close to 0.9260 this morning, its highest level since late November.
Today, Japan will issue CPI and retail trade data. The UK will deliver its Q4 current account and final reading of Q4 GDP. Business and consumer confidence surveys will be released in the Eurozone. Finally, the US will release the University of Michigan Consumer Confidence survey.
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