by Kymberly Martin
NZ Dollar
The NZD/USD sits at a similar level to yesterday morning, at 0.8480, at present.
The NZD/USD experienced brief volatility after the release of the NZ 2Q labour market report yesterday morning. This is not surprising given the report initially seemed to provide something for everyone.
The unemployment rate fell more than expected, to 5.6% (consensus 5.8%), but this was partly explained by an unexpected decline in the labour participation rate.
In addition, the quarterly employment change was softer than expected (0.4% vs. 0.7%).
Overall, in our view, the report was quite neutral, and that seems to be largely the conclusion the market came to. After the NZD/USD slipped below 0.8440, it consolidated in the afternoon, before creeping higher overnight, back to 0.8480.
Support remains at the early-June lows of 0.8400. Resistance is eyed at 0.8520.
On the crosses, the NZD/GBP briefly dipped below the psychologically important 0.5000 level last evening. However after a disappointing UK industrial production report last night this cross soon recovered. It trades back up at 0.5030 this morning.
The NZD/AUD sits a little lower, at 0.9060. All attention today will be on the AU employment report. Assuming no significant surprise in today’s report we would look at entering a tactical long position, targeting a return toward 0.9250 in the short-term. Currently the cross sits right on key support levels which have marked the year-to-date lows.
Domestically, only QV house price data is due for release today.
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Majors
Over the past 24-hours the JPY has been the strongest performer, closely followed by the AUD. The USD sits a little lower this morning.
Risk appetite remained somewhat subdued overnight. News headlines reported the prospect of a Russian invasion of Ukraine had increased as the number of soldiers near the border grows. Our global risk appetite index now sits at 62%, down from 84% a fortnight ago. European equities markets posted negative returns (Euro Stoxx 50, -7%) also assisted by disappointing EU data delivery.
European data delivery overnight was generally on the weaker side of expectation. Most notably, German June factory orders came in a -3.2%m/m (0.9% expected) to be down 2.4%y/y. This led to the EUR/USD touching intra-night lows below 1.3340, before later rebounding to 1.3380.
The ‘safe haven’ JPY was a beneficiary of the more sombre mood in markets overnight. From 102.60 last night the USD/JPY has declined to 102.00 currently.
The GBP/USD gapped lower last night after disappointing UK June industrial production data (0.3%m/m vs. 0.6%). However the GBP/USD found its feet around the 1.6830 level, before returning to trade at 1.6850.
The AUD/USD that had been on the ascendancy since last evening enjoyed a spurt higher in the early hours of this morning. It sits at 0.9350 currently as we approach the AU data highlight of the week, the July employment report. Consensus expectations are for a 13.2k change to employment and for the unemployment rate to remain steady at 6.0%.
Tonight the ECB and BoE are due to meet but neither are expected to announce any policy changes. However, President Draghi’s press conference will no doubt be dissected by the market.
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4 Comments
We must be careful our rockstar economy , does not turn out to be a One-hit-wonder .
Our chart topper , the dairy price , is moving off the top songlist , and we had better ensure the rock bands agent and manager John Key comes up with another chart topper.
The chief songwriter , Graeme Wheeler , is pushing his luck , and the production and recording studio , Fonterra , risks pricing itself out of the market
Meanwhile , the Rock Band members and a huge number of their followers have again gotten addicted to easy money and credit, and it could all end in tears .
Bob Jones has suggested that if our 'Rock Star' economy is due to the Chch rebuild - then to keep the momentum going then we should buy some bombers and bomb out a few more towns & cities.
While the immediate insurance inflow & building may boost official GDP, the wider damage to businesses and families and longhaul issues/problems are surely a negative influence on NZ's economy.
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