By Raiko Shareef
Currency markets saw a modest reversal of the past week’s relentless USD selling, ahead of the US employment report tonight.
GBP is experiencing whippy trading, even before the first General Election exit polls are released.
AUD has underperformed.
Bond yields continue to be the primary driver of EUR, and today, they have tended to follow the oil price lower. EUR/USD traded lower, and back through the 100-day moving average, before settling just above it.
We would ascribe some of the overnight moves to an element of position squaring ahead of the all-important US employment report tonight.
The readings will be more important than usual, given it is one of only two ahead of the Fed’s next policy decision in mid-June. If both readings are stellar, then the odds of a September rate hike will rise markedly. Last night’s weekly jobless claims numbers were encouraging, with the trend falling to a fresh 15-year low.
The first exit polls for the UK’s General Election will be released at 9am NZT today, when voting stations close. The last opinion polls continue to signal a dead heat.
We envisage a volatile 24 hours for GBP, as the evolution of exit polls update the prospects of a markets-friendly government being formed (if a government can be formed at all).
NZD/USD was knocked back, and sits within a sticky support area between 0.7400 and 0.7460. It looks to be keying off the NZD/AUD cross, which has resisted rising back through 0.9430 over the past two sessions.
Today’s RBA Statement on Monetary Policy may well provide the impetus to sustainably break that level. Investors are wary that the RBA, unhappy about the AUD’s bounce after Tuesday’s policy decision, may choose to highlight that the door remains open to further rate cuts.
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