ECB tones back the urgency rhetoric, European currencies stronger, eyes on NZ Q4 inflation expectations

ECB tones back the urgency rhetoric, European currencies stronger, eyes on NZ Q4 inflation expectations

By Kymberly Martin

NZ Dollar

The NZD/USD has declined to trade around 0.7850 this morning.

It was a relatively quiet start to the week for the NZD/USD as it pushed above 0.7910 yesterday afternoon. However, overnight in the backdrop of stronger European currencies the NZD/USD fell away.

It trades around 0.7850 currently. Resistance is eyed at 0.7890, while support is seen just above 0.7800.

The NZD has weakened against its key European peers since the start of the week. The NZD/EUR was on the descent from early evening, a move that was exacerbated by a better-than-expected German IFO release. It currently trades at intra-night lows just below 0.6320. Similarly, the NZD/GBP has declined to trade just below the magnetic 0.5000 level this morning.

By contrast, the NZD/AUD strengthened overnight to trade around 0.9120 this morning. Key resistance remains in the 0.9140-0.9160 window that has marked the top of the range for the cross since late July.

Our medium-term view is for a slightly lower NZD/AUD.

Narrowing interest rate differentials, later next year, should reduce one of the supports for the cross at current levels. We see the cross more consistently below 0.8800 by 2H next year

Today, the RBNZ will release its Q4 survey of inflation expectations. These are likely to confirm inflation expectations are not a pressing concern for a Bank that we see being ‘on hold’ until the end of next year.

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Majors

The AUD and JPY have been the weakest performing currencies since the start of the week, in the backdrop of a fairly flat USD.

Overnight, the EUR/USD was given a boost after the German IFO survey surprised to the upside. Both the current assessment (110.0 vs. 108.0) and the forward-looking expectations component (99.7 vs. 98.5) were above consensus expectations.

In his scheduled speech overnight, ECB’s Nowtny stated there are always circumstances for further policy action. However, he seemed to push back on the market’s sense of urgency, saying the Bank should wait to see the effect of policy measures before taking on new ones. From intra-night lows below 1.2380 the EUR/USD pushed up to around 1.2430 at present. The GBP/USD also benefitted from the move and has risen to trade around 1.5700 this morning.

Meanwhile, the USD/JPY has again broken through 118.00 to trade at 118.40 this morning. The next challenge will be last week’s highs close to 119.00, its highest level since August 2007.

The AUD/USD was on the back foot from early last evening. It has traded steadily lower from 0.8700 to 0.8600 currently. Key support remains at the early-Nov lows around 0.8540. This evening all eyes will be on RBA Deputy Governor Lowe who is scheduled to speak at a Business Economists’ dinner.

This evening the second reading of US Q3 GDP will be released. US consumer confidence and the Richmond Fed Manufacturing Index is also due.

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USD 
NZD
End of day UTC
Source: CoinDesk

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