by Kymberly Martin
NZ Dollar
The NZD was the only major currency not to strengthen relative to the USD on Friday. It ended the week around 0.8780.
Currency markets were relatively directionless on Friday night although USD weakness was the pervading theme.
However, the NZD/USD was reluctant to push onto new highs. From early evening highs around 0.8790 the NZD/USD dipped to intra-night lows below 0.8760.
It then crawled back up to 0.8780, the level that it trades at this morning.
RBNZ data released on Friday showed the Bank bought net NZ$10m in May. This was another very small change in monthly figures. It certainly does not constitute ‘intervention’ that Governor Wheeler had hinted might be justified in an early May speech.
The NZD/EUR pulled back from recent highs on Friday night. Having touched 0.6460 on Friday morning (its highest level since May 2013) it subsided over the course of Friday night. The NZD/EUR closed the week at 0.6430.
Today kicks off with one of the domestic data highlights of the week, the ANZ business confidence decline a little further from the previous 53.5 reading. Although this would remain a highly elevated reading, consistent with well above trend GDP growth, the market may respond to the seeming loss of momentum. The business confidence headline reading peaked at 70.8 in February.
Key resistance for the NZD/USD remains at 0.8790, ahead of post-float highs of 0.8840. Support is eyed at 0.8750.
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Majors
The USD was weaker on Friday night, while the JPY and CHF were the key outperformers.
The USD weakened against most of its peers on Friday night. Although the strongest performance came from traditional ‘safe haven’ currencies, the JPY and CHF, risk appetite actually remained solid. The S&P500 pushed higher by a further 0.20% and our global risk appetite index (scale 0-100%) remains at a healthy 83%.
A stronger EUR on Friday night was likely assisted by the release of German CPI data. The EU harmonized reading for June came in at 1.0%y/y (0.7% expected). In a region where deflation remains a lingering concern the upside surprise is notable. The EUR/USD crept up from intra-night lows close to 1.3610, to end the week at 1.3650.
The final reading of UK Q1 GDP was released on Friday night. While the quarterly reading remained at 0.8%, the annual figure was revised down marginally, to 3.0%. The GBP/USD took the data in its stride, ending the week at 1.7030. The pound is still nudging up against its highest levels since August 2009.
The AUD/USD failed to break through key resistance levels on Friday night. It declined from early evening highs above 0.9440 to end the week around 0.9420. Resistance remains in the 0.9440-0.9460 window which has marked the highs on the currency since last November. Today the key AU data release will be private sector credit, where we expect continued moderate growth.
This evening it will be all eyes on the release of Eurozone June CPI. Consensus expects core CPI to remain at 0.7%, enough to maintain some sense of urgency at the ECB to further loosen policy. Any high-side surprise in the data would likely be EUR supportive. Tonight, UK mortgage approvals, US pending home sales and the Chicago PMI will also be released.
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