By Kymberly Martin
USD strength was once again the dominant theme overnight.
European currencies underperformed.
Yesterday evening, China data releases were all slightly below expectation, suggesting the economy is slipping toward (if not below) the lower GDP growth targets China officials now appear comfortable with.
The AUD’s response was limited, but the currency succumbed more broadly to USD strength overnight. The AUD/USD trades at 0.7580 this morning, ahead of the key AU employment report release this afternoon. Our NAB colleagues, along with consensus, look for 15k additions to employment.
Overnight, the now familiar theme of EUR weakness continued as German bond yields slipped to new lows. The EUR/USD has fallen to 1.0560. GBP/USD was also dragged lower in the early hours of this morning, have shown little response to a disappointing UK industrial production number earlier in the night. The GBP/USD broke through year-to-date lows to trade at its lowest level since July 2013, at 1.4900.
Declines in the CHF were also notable. It is interesting to note that the USD/CHF, at 1.0090 is now almost back to where it traded in early-Jan, before the Swiss National Bank removed the CHF/EUR cap. At that point USD/CHF plummeted below 0.7500. It has gradually climbed its way back over the past couple of months as the CHF has depreciated along with the EUR.
The USD data highlight this evening will likely be Feb retail sales. This may give some indication as to whether consumers are spending some of their oil price windfalls.
NZD/USD has continued its relatively orderly descent over the past 24-hours.
Ahead of the RBNZ’s meeting this morning, the NZD/USD now trades at 0.7210. The early-Feb lows sit not far away at 0.7177.
The recent downshift in the NZD, likely not only reflects USD strength, but also expectation the RBNZ will present a softer tone and lower 90-day bank bill track at its meeting today.
The RBNZ is also widely expected to still refer to the currency as “unjustified” and “unsustainable”, given declines in the NZ TWI have been more modest than the fall in the NZD/USD. The RBNZ will therefore need to deliver more than this to prompt the NZD/USD to break lower today.
It could be a volatile day for the NZD/AUD cross with the RBNZ’s meeting followed by the AU employment report this afternoon. The NZD/AUD currently lies at 0.9510.
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