By Kymberly Martin
NZ Dollar
The NZD/USD has rebounded to 0.8370 this morning, in the backdrop of a broadly weaker USD overnight.
Fonterra’s announcement yesterday afternoon was primarily focused on strategy, and its intention to take a 20% stake in Beingmate in China, and invest more in its NZ processing capacity.
However, it did also restate its milk price forecast at an unchanged $6. This was above general expectations, although Fonterra did say market conditions were difficult and downside risks remain. We agree.
However, the lack of a killer blow in the announcement helped start the NZD/USD on an upward path yesterday afternoon. This was enhanced by broad USD weakness overnight. The NZD/USD has traded up to 0.8370 this morning.
The NZD has also strengthened against most of its peers except the CAD, over the past 24-hours, although it lost momentum against its European peers overnight. From early evening highs above 0.6360 the NZD/EUR now sits below 0.6350.
The NZD/AUD was on the ascendancy yesterday afternoon but reached a peak early last evening above 0.8980. Subsequently it has drifted lower to sit around 0.8970 this morning.
With no data scheduled on the domestic agenda today, the cross will likely take its direction today from the release of Q2 capex data across the Tasman. NZD/AUD support is now seen at 0.8940. Resistance will likely be encountered at 0.9040.
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Majors
The USD gave back some of its recent gains, under-performing all its peers overnight. The CAD was the top performer over the past 24-hours.
In a relatively quiet night, that was light on data releases, equity markets were almost completely flat on both sides of the Atlantic. On the geopolitical front it was reported that fighting in Eastern Ukraine continues to rage after inconclusive talks between Russian and Ukraine presidents. However, the clear trend in currency markets was the loss of upward momentum in the USD index. It gave back all of its previous day’s gains. It sits at 82.40 this morning.
Almost all its peers were on the ascendancy overnight. The EUR/USD bounced from its relentless downward path of the past fortnight. It sits close to 1.3200 this morning. The currency was unperturbed by the German consumer confidence survey that declined from to 8.6 (8.9 expected).
The CAD was on a steady path higher overnight. There was some speculation in markets whether planned cross-border M&A activity will result in demand for the CAD. The CAD sits 0.90% higher against the USD this morning, at 1.0850.
The AUD/USD also traded a steady path higher overnight, to sit at 0.9340 this morning. Today’s AU data highlight will be Q2 private capital expenditure. Our NAB colleagues suspect this will suffer from the decline in mining investment. They look for a 2.0% fall (consensus -0.9%).
However, the main interest will be in the full-year 2014-15 expectations. These have already been revised higher in the March quarter, to $137b, and we expect further upward revision to around $142b. If so, this could help mute the currency’s negative response to the Q2 fall in capex.
Tonight, German employment, Eurozone consumer confidence and US pending home sales data will be released. The second reading of US Q2 GDP is also due.
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