By Kymberly Martin
Despite some choppy trading, the USD index ended Friday little changed. The EUR outperformed and the NOK was the weakest performer.
Friday night’s moves in equities and commodities over-shadowed those in currencies.
Equity markets were down across the board, led by a 2.1% decline in the Euro Stoxx50. Whilst difficult to pinpoint the exact cause, sentiment was not helped by headlines showing Greece and its official creditors appear still miles apart in their negotiations. However, in this context ECB’s Draghi did warn it is “pointless to go short on the Euro”. Maybe the market listened, as the EUR/USD ended the night marginally higher, at 1.0810.
The NOK was the weakest performer on Friday. Its more than 1% decline versus the USD was likely assisted by a pullback in the global oil price. WTI closed down 1.7%.
The GBP/USD initially strengthened after the delivery of the Feb UK labour market report. The fall in the UK unemployment rate was in line with expectation (5.6%), but indications of actual employment were stronger than anticipated. However, the GBP/USD was unable to hold onto its move above 1.5050 and ended the week at 1.4960.
The AUD/USD found resistance at 0.7840 on Friday night, returning to end the week at 0.7780. This morning, sentiment toward the AUD and NZD may be helped by a late-weekend rate cut from the People’s Bank of China. It announced a 1% cut to the RRR for all banks, to 18.5%, effective today. This is double the size of the Feb cut, and after PBOC Chief Zhou in Washington on Saturday indicated scope for interest rate cuts as well as RRR moves. So another rate cut is probably not far off.
However, with regard to the NZD/USD, the spotlight will also be on domestic data today, in the form of 1Q CPI. Our expectations for a 0.1%y/y reading is slightly above the RBNZ’s own published forecast. Still, an outcome so far south of the RBNZ’s 2% inflation target may only encourage the market in its inclination to price RBNZ rate cuts.
This could weigh on the NZD/USD, in the first instance, ahead of the RBNZ’s Thursday speech on inflation. That may attempt to rebuff expectations for cuts in response to current low CPI. Near-term NZD/USD support is seen at 0.7600 while resistance is eyed at Friday night’s highs of 0.7740.
On the crosses, the NZD/AUD strengthened steadily on Friday night, to end the week at 0.9870. This takes the cross back to the level it traded immediately prior to the AU employment-report-inspired plunge.
Support remains at 0.9800 while resistance will likely be encountered above 0.9920. Also look out for a scheduled speech by RBA Governor Stevens tonight in New York, which has potential to impact on the AUD.
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
Daily exchange rates
Select chart tabs
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.