By Kymberly Martin
NZ Dollar
The NZD/USD has continued to slip lower, to trade just above 0.8420 this morning.
There have been a range of influences on the NZD over the past 24-hours. Yesterday morning’s 2Q PPI data (output -0.5%) was in line with indicators leading up to the release, but seemed to catch the market by surprise.
The currency’s response (dip) to what would normally be a little-watched data-point shows the market’s current inclination to sell the NZD. It appears to be looking for excuses to continue the downtrend.
Overnight, like most of its peers, the NZD was a victim of broad USD strength that kicked in, in the early hours of this morning.
The latest GDT dairy auction also took place early this morning and appeared to inspire some NZD volatility. The -0.6% fall is average dairy prices was actually rather stable following recent sharp declines.
However, the 41% decline in prices since February suggests a drag on economic activity over the coming 18 months. The NZD/USD now sits just above key support seen at 0.8400. This level has marked the lows since March this year.
The NZD/AUD sits lower this morning at 0.9050, having clawed its way back from early evening lows below 0.9030. This marked the lowest level on the cross year-to- date.
Today, in the absence of scheduled NZ data releases the cross may take its cue from the RBA Governor’s testimony, scheduled for 11.30pm (NZT).
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Majors
A stronger USD was the theme of the night. The GBP has been the key underperformer.
While geopolitical concerns remain not far from the spotlight, a lack of negative headlines overnight helped the market return its focus to data.
The Red Cross has also reported it is close to a safe-passage plan for a Russian aid convoy intended for Ukraine. Equities recorded positive returns, with the Euro Stoxx 50 up 0.6% and the S&P500 currently up 0.5%.
The USD had a slight upward bias early in the evening but was catapulted higher after early-morning US data releases. Core CPI rose 0.1% in July (0.2% expected), while the annual rate remained at 1.9%. The positive surprise, however, came in the form of US July housing starts data which rose 15% (8.1% expected).
This helped buoy the USD index from below 81.70 to its current level of 81.90. This is its highest level since September last year.
The EUR was a direct casualty, along with most of its European peers. The EUR/USD sits at 1.3320 this morning. The ECB will likely be pleased that the common currency is touching its lowest levels since mid-September last year.
The GBP/USD gapped lower earlier in the evening on the back of the UK July CPI release. This came in at 1.6%y/y (1.8% expected), with core CPI at 1.8% (1.9% expected). The GDP/USD fell from evening highs above 1.6720 to trade at 1.6620 this morning.
The release of the RBA Minutes early yesterday afternoon reiterated the core message that “a period of stability in interest rates” is the most prudent course. There was no hint the Board was considering a rate cut despite some recent downgrading of growth and inflation forecasts. This is likely what prompted a pop higher in the AUD.
The AUD/USD traded as high as 0.9340, before USD strength took its toll early this morning. The AUD/USD sits just below 0.9310 currently. Today the focus for the AUD will be RBA Governor Steven’s semi-annual testimony to the House of Representatives.
Tonight’s focus will be the release of Bank of England and US Fed Minutes. However, the US Minutes may take something of a back seat as the market remains focused on Chair, Yellen’s speech at the Jackson Hole conference at week end.
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