By Kymberly Martin
NZ Dollar
The NZD slipped along with most of the majors against the USD on Friday, dipping 0.3% to 0.8360.
That puts NZD/USD smack in the middle of the 0.8300-0.8420 range it largely kept through late August.
On Friday, the ANZ business survey showed more softness than the market had likely anticipated. The headline confidence measure slid to +24.4 from +39.7, while the own activity expectations indicator dipped to +36.6 from +45.1.
Much of the drag stemmed from the agricultural sector, as recent price declines weigh.
This week should see more of the same, with commodity prices taking centre stage amongst local data releases.
Today, we expect that NZ’s official terms of trade will finally begin to account for dairy price decline seen earlier in the year. We pick the Q2 reading to fall by 5.1% q/q.
Later this week, we are due updates from the ANZ commodity price index (Tue) as well as the fortnightly dairy auction (Wed).
Today, we see support just above 0.8300, and expect initial resistance at 0.8420.
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Majors
The USD gained on Friday, as investors chose to take positives from a mixed set of US data. The US Dollar Index gained 0.3% to hit a new fresh 2014 high at 82.7, helped there by an underperforming EUR.
US data kicked off on a less-than-positive note, with July’s personal incoming and spending data disappointing. Personal income rose by 0.2% (+0.3% exp), while personal spending fell by 0.1% (+0.2% exp). This puts a downward bias on analyst expectations for Q3 GDP.
But later in the evening, the Chicago PMI showed a better-than-expected rebound from July’s lows, at +64.3 vs +56.5 exp. In addition, the Univ. of Michigan consumer confidence index also improved, to +82.5 vs +80.0 exp.
The market was braced for sickly euro-zone inflation data, and was not disappointed.
The headline measure slipped to just +0.3% y/y (as anticipated), though the ECB will take heart from an unexpected improvement in the core (ex-energy) measure, which rose from +0.8% y/y to +0.9%. Nonetheless, the market continues to expect further easing at this week’s meeting, and EUR/USD was the worst-performing major currency on Friday, falling 0.4% to 1.3130.
Tensions seem to be on the rise again in the Ukraine, after what Western officials called a Russian invasion in everything but name last week. Investors are braced for a fresh round of sanctions. Over the weekend, European leaders agreed to impose tougher sanctions on Russia, possibly targeting energy and finance, if the war in Ukraine worsens. EU leaders gave the European Commission a week to deliver proposals for the penalties and left open the precise trigger for further sanctions.
It is a huge week in news and data. In addition to the full handful of central bank meetings, data highlights include Australian Q2 GDP on Wednesday, and the US employment reports on Friday. Note that the US is on holiday today, for Labor Day.
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