By Kymberly Martin
NZ Dollar
The NZD was the weakest performing currency at the start of the week, now sitting 0.7% lower relative to the USD, at 0.8350.
Most of the fall in the NZD/USD occurred soon after the open yesterday morning.
The sudden sharp fall prompted speculation of RBNZ intervention, but this was entirely unsubstantiated.
More broadly the NZD is the victim of continued USD strength at the start of the week. The NZD/USD soon found its feet at 0.8350 yesterday morning and has traded around that level since.
Today’s release of the NZ trade balance is not likely to do too much to support the NZD. We expect this to show a hefty $NZ979m deficit (consensus, $NZ475 deficit). This is due to the recent slump in diary prices starting to show up in the merchandise trade figures and is a taste of the negatives to come.
Below current levels there is not too much in the way of technical support for the NZD/USD until a strong band at the 0.8200-8240 level. Resistance lies at 0.8410.
The NZD sits lower on all the crosses this morning, after yesterday morning’s lurch downward.
The NZD/AUD broke lower but managed to find support around 0.8960 last evening, before idling its way back up to 0.8980 this morning.
This cross is now at its lowest levels since early-December last year. We do not see the cross now being on a one-way path South as relative fundamentals still support some rebound by year-end.
Still, negative momentum could carry the cross lower in the absence of any positive NZ/negative AU data surprises this week.
Today’s NZ trade data is unlikely to provide a positive surprise.
Across the Tasman the AU consumer confidence survey will be released today.
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Majors
The USD index opened higher at the start of the week. The NZD was the weakest performer, while the GBP was the only currency to hold its own against the USD.
Following the respective comments by Fed Chair Yellen, and ECB President Draghi at the start of the weekend the USD index opened higher this week. It then traded sideways above 82.50 for most of the night. The US Services PMI (58.5 vs. 58 expected) and disappointing new home sales data passed without much reaction.
The EUR was slightly weaker. The EUR/USD reached its lows overnight after the release of the August, German IFO business climate survey. This came in slightly below expectation at 106.3 vs. 107.0. Both expectations and the current assessment slipped from the previous reading. The EUR/USD sits just below 1.3200 this morning.
Meanwhile, Eurozone equity markets put in a very strong performance, possibly spurred by the promise of further ECB stimulus. The Euro Stoxx 50 closed up 2.2%. The S&P500 briefly poked its nose above the psychologically important 2000 level but has returned to trade at 1998.
While the UK observed a Bank holiday, the GBP managed to move slightly higher relative to the USD, in contrast to most of its peers. The GBP/USD trades at 1.6580 currently.
Today, the AU Roy Morgan consumer confidence survey will be released. Tonight, US durable goods orders, consumer confidence and the Richmond Fed Manufacturing index will be released.
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