Reversing the declines at the end of last week, the USD has started the week stronger across the board.
Upward momentum took hold late in the evening and was not unsettled by the release of softer-than-expected US existing home sales data in the early hours of this morning.
The move appeared to be vindicated by comments from the Fed’s Lockhart in the recent hours of the morning. He suggested the Fed’s delay from tightening at the Sept meeting was mostly influenced by market volatility.
However, “As things settle down” he will be ready for the first hike on the path to a more “normal interest rate environment”. He is still expecting this by year-end.
The USD index trades close to its 100-day moving average this morning, at around 95.90.
By contrast, the EUR was on the back foot for most of the night. There were a number of ECB members speaking overnight, but few attention-grabbing headlines. However, ECB’s Praet admitted he was a “little bit worried” about the recent spike in market volatility.
But he reiterated that if the ECB’s objectives were at risk they will do “what is necessary”. The EUR/USD trades at 1.1190 this morning.
The GBP has declined against the USD, but has outperformed a number of its peers ahead of a scheduled speech by Bank of England’s Governor Carney this morning (NZT) in London.
Pricing for Bank of England action has recently slipped a little. A first hike is no longer fully priced within 2016. Currently the GBP/USD trades just below 1.5500.
The NZD and AUD both declined in the face of a broadly stronger USD overnight, though the NZD has scored the dubious honour of worst performing major so far this week.
The NZD/USD found support at 0.6300 overnight and now trades just below 0.6320.
There are no domestic data releases today so broader offshore sentiment will likely set the tone for the NZD.
Tomorrow’s China Manufacturing PMI release looms as the next key data point likely to impact on the mood toward the AUD and NZD. Today, also look out for the AU Q2 house price index.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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