by Kymberly Martin
NZ Dollar
It was a quiet end to the week for the NZD as local markets were closed for ANZAC day.
The NZD/USD closed at 0.8580.
For the past week, or so, the NZD/USD has traded a fairly tight range between 0.8550 and 0.8640.
The top of this range was approached soon after the RBNZ’s announcement on Thursday morning. The NZD initially popped higher on the announcement. The RBNZ did not attempt to talk down the elevated currency.
Rather, it simply stated that if a stronger NZD was to dampen inflationary pressures it could impact on the speed of future OCR hikes.
The market reacted as if this provided tacit approval for further NZD strength.
However, as the day wore on, the initial euphoria faded and the NZD/USD slipped to below pre-RBNZ-meeting levels. It traded a tight range on Friday, despite fairly subdued global risk appetite, to end the week at 0.8580.
Ranges on the key crosses were also tight on Friday. The NZD/AUD traded between 0.9230 and 0.9260, to end the week at 0.9240.
Today will be a quiet start to the week locally. There are no scheduled data releases in NZ. The highlight of the local calendar will come on Wednesday when the ANZ business survey is released. Its growth indicators can afford a (well-overdue?) correction and not mean that much. However any further increase in its pricing intentions variables will be more important from the RBNZ’s perspective.
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Majors
It was a fairly quiet end to the week for currency markets. The USD index ended Friday little changed, just below 79.80.
As Australasian markets closed to remember ANZAC day, broader market sentiment remained fairly subdued.
The escalating situation surrounding Ukraine remains tense. Our risk appetite index (scale 0-100%) dipped from 71% to 67%. Equities provided negative returns on both sides of the Atlantic (Euro Stoxx 50, -1.3%, S&P500, -0.8%).
Most majors traded fairly tight sideways ranges. The JPY marginally outperformed along with the AUD and NZD. As the JPY closed the week at 102.20, it is still well within ranges it has traded for the past three months. We expect notable further weakness in the JPY (we see the USD/JPY above 110 by year-end). However, this will be contingent on further easing announcements from the Bank of Japan as the US Federal Reserve remains on track to raise rates from 2H next year.
The GBP/USD experienced some heightened volatility around the release of UK retail sales data on Friday night. Having dipped as low as 1.6790 approaching the data, the GBP/USD spiked to 1.6830 soon after. UK retail sales for March (ex-autos) rose 0.1%m/m (-0.4% expected), to be up 4.2%y/y. The GBP/USD later settled down and drifted off to end the week at 1.6800.
It is a fairly slow start to the week locally. The NAB SME and ASX300 business survey will be released today. Japanese retail sales are also due for release. Tonight, UK house prices and US pending home sales will be delivered, along with the Dallas Fed survey of manufacturing activity in the US.
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