sign up log in
Want to go ad-free? Find out how, here.

NZD sent sharply lower on dairy price falls, may get pushed around again today when employment data is released

Currencies
NZD sent sharply lower on dairy price falls, may get pushed around again today when employment data is released

by Raiko Shareef

NZ Dollar

The NZD was sent sharply lower overnight on broader USD strength, as well as another dismal dairy auction. NZD/USD is 0.6% weaker at 0.8470.

Dairy prices fell a further 0.8% in the latest GlobalDairyTrade auction, taking the cumulative decline since early February to an eye-watering 41%.

With the NZD’s fall having been (much!) more modest to date, Fonterra’s fresh 2014/15 payout forecast of $6.00 looks optimistic at this point. Current prices and the level of the NZD would suggest a milk price in the mid-$5 area.

Last night’s events had NZD/USD testing the edge of very significant support between 0.8400 and 0.8460. A brief foray below the 200-day moving average was rejected, and that remains the first line of support today. We expect good selling interesting around 0.8530.

NZD’s underperformance relative to the AUD has the cross 0.4% lower at 0.9100.

Provided no untoward surprises from employment reports on both side of the Tasman this week, we would look at entering a tactical long position, targeting a return toward 0.9250 in the short term.

Today’s local labour market report could be the trigger that sees a test of 0.8400 on NZD/USD.

While we firmly believe in the strength of the NZ recovering (thus picking a fall in the unemployment rate despite rising participation), we’re well aware that the HLFS survey can sometimes feel like a lottery. We shall wait and see.

----------------------------------------------------------

To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.

Email:   

----------------------------------------------------------

Majors

The USD is broadly stronger on the back of punchy US data outturns, and perhaps also benefitting from a fresh bout of Russia/Ukraine risk aversion. The US Dollar Index is up 0.2% to 81.5, back near the 2014-high.

US non-manufacturing ISM printed at 58.7, up from 56.0 in June, and against expectations of a much milder improvement. This puts the index at its highest level since December 2005. Separately, US factory orders rebounded strongly from June’s 0.5% m/m decline to rise by 1.1% (0.6% exp).

EUR weakness led most of the majors lower against the USD from early in the European session. There, flat-to-poor from services PMI look to have sparked a measured drift lower. In particular, Italy’s composite PMI slipping from 54.2 to 53.1 garnered its fair share of attention. EUR/USD is 0.3% weaker for the day at 1.3380.

The GBP was the only major to gain against the USD, thanks to a services PMI read that trounced expectations to rise to 59.1, an 8-month high. GBP/USD is 0.1% stronger at 1.6880.

And just to round off our unusually detailed coverage of services PMI prints, we should note that China’s HBSC version unexpectedly plunged from 53.1 to 50.0 in July, the worst reading since the series began in 2005.

But this morning, the real focus in markets is the eastern edge of Europe, where investors are weighing up the prospect of a Russian invasion of Ukraine.

The JPY reversed course on that sentiment to perform relatively well against the USD as a safe haven, while US equities more than reversed Monday’s gains. The S&P 500 is currently 1.0% lower for the day.

That will remain the focus for the day ahead, with the major data calendar looking fairly light ahead of more significant releasestomorrow (AU employment; BOE, ECB meetings). If anything, UK industrial production and manufacturing data may warrant some attention tonight.

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

All its research is available here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.