Seasonal disruptions to blame for slump in China trade data; QSBO inflation indicators could set tone for future RBNZ moves; NZD/GBP markedly lower

By Kymberly Martin

Since the start of the week the AUD and NZD have been standout underperformers. The GBP has marginally outperformed the USD.

The most notable move in currencies over the past 24-hours was a gap lower in the AUD and NZD, after the release of disappointing China trade data early yesterday afternoon. The unexpected slump in China exports may have been a result of seasonal disruptions rather than soft demand, but the import numbers were still pretty weak. Lower commodity prices are likely much of the story here however.

Still, the AUD/USD gapped from above 0.7660 toward 0.7600 on the result, before consolidating around 0.7580 overnight. The moves show how sensitive the market remains to any signs of softness in the China economy.

NZD/USD also gapped from close to 0.7540 toward 0.7480. It continued to slide during the evening before consolidating around 0.7440 this morning.

Today, the Q1 Survey of Business Opinion will be the release to watch. We would not be surprised to see headline business confidence nudge higher from Q4’s +23. However, also look out for the survey’s inflation indicators that may have the more enduring impact on the market’s expectations for future RBNZ action/inaction.

The NZD/AUD was initially spurred higher by the China data. However, the move could not extend beyond 0.9850. Subsequently the cross has returned to trade at 0.9820. Unsurprisingly the NZD also sits lower on most of the other crosses, most notably against the GBP. The NZD/GBP sits around 1.5% lower this morning, at 0.5074.

Trading in the USD followed a similar pattern to that of US bond yields, in the absence of US data releases overnight. Both moved higher in the late evening, with the USD index within a hair’s breadth of 100.00 for the first time since mid-March. However, it has subsequently subsided to trade at 99.50.

The GBP/USD was on a steady ascent overnight, and has been the best performing major currency since the start of the week. It has rebounded from almost 5-year lows, to trade at 1.4680 this morning.

The focus tonight will be the release of UK March CPI. Consensus expects headline CPI to remain flat compared to a year ago, supporting the market’s expectation that the BoE will remain on hold until, at least, H2 next year.

Tonight’s US retail sales data has potential to be the key driver of the USD. Consensus is hopeful the March data can rebound from the disappointing February results. The market is still looking for signs that consumers have been motivated to spend some of the windfall from earlier oil price declines.

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