by Kymberley Martin
NZ Dollar
Despite a little US payrolls-inspired volatility, the NZD/USD ended the week little changed from Friday morning, at 0.8500.
The NZD/USD pushed toward 0.8540 ahead of the release of US May payrolls data early on Saturday morning.
Along with most of its peers it then suffered a short bout of volatility as the market digested the data.
Ultimately trading settled down and the NZD/USD ended the week at a similar level that it had started on Friday, around 0.8500.
The NZD also made gains against most of its peers early on Friday night, but failed to hold onto these levels.
The NZD/AUD briefly made a probe above 0.9140 before slipping back to end the week around 0.9100. It is fractionally lower on the open this morning.
Short-term we continue to look for a rebound in the NZD/AUD to the vicinity of 0.9260.
The domestic highlight for the NZD this week will clearly be Thursday’s RBNZ meeting.
In the lead-up there is little on the data agenda to crucially impact on OCR expectations.
Today, NZ Q1wholesale trade data will be released. We anticipate trade values to expand a seasonally adjusted 0.9%. This would feed into the 1.2% reading we now expect for Q1 GDP.
Near-term, NZD/USD support should be found approaching 0.8450, ahead of 0.8400. Resistance will likely be encountered approaching Friday night high’s just above 0.8550.
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Majors
The release of US payrolls data inspired initial volatility on Friday night. But overall, the USD index ended the week little changed, just above 80.40.
The much anticipated US May payrolls data came in close to expectation, at 217k. In addition, the unemployment rate remained at 6.3% as the labour participation rate held steady. Average hourly earnings crept up to 2.1%y/y. Overall the report suggests the economy is back on track after earlier weather-related weakness. US equities ended the week on a solid note (the S&P500 +0.5%). US bond yields closed a little higher.
The release initially inspired volatility in both bonds and currencies, as the market grappled to interpret it. The EUR/USD initially surged toward 1.3680 before later slipping toward 1.3620. Subsequently when the market calmed down, the EUR/USD crept back up to the level it had traded prior to the release, ending the week at 1.3640.
Similar dramatics were seen across most major currencies, before they returned to trade at pre-payrolls levels within an hour, or so, of release. Across emerging market currencies there was bias toward strength relative to the USD, after the payrolls data.
Intra-night moves saw the USD/JPY dip toward 102.10, before rebounding to end the week at 102.50. Squinting through the bumps, the USD/JPY has essentially flat-lined around the 102.00 level since late January this year.
This Friday’s Bank of Japan meeting is unlikely to be a game-changer, on this front. Most analysts believe it is still too early to expect further stimulus from the BoJ, given slightly more upbeat commentary of late. Ultimately, we do see the BoJ delivering more stimulus at it strives to achieve its 2% inflation rate. We see the USD/JPY at 108.00 by year-end.
In this context, today Japan’s balance of payments, consumer confidence and final reading of Q1 GDP will be released. Otherwise it is a relatively quiet start to the week. RBA Governor Stevens is scheduled to speak on “Financial Regulation” in San Francisco.
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