In the backdrop of heightened risk aversion overnight, the JPY and USD outperformed, whilst European and Australasian currencies have declined.
As the focus of concern appears to remain squarely on China, global commodity prices resumed their fall.
The CRB broad index of global commodities has fallen 1.6% overnight.
The WTI oil price is currently off 2.7%. Our global risk appetite index (scale 0-100%) has declined from 39% to 33%, as measures of market volatility have pushed higher.
In this context, the ‘safe haven’ JPY has been the key outperformer, and the only currency to make gains against a broadly stronger USD. The USD/JPY trades at 120.00 at present.
The USD has also been well supported as the market has shunned ‘commodity-linked’ and European currencies. The USD index now trades at 96.30, well above last week’s pre-FOMC levels.
The AUD and NOK have been amongst the worst performing currencies, weighed on by their association with commodities. The NZD was not too far behind.
However, the NZD/USD found some support just above 0.6270 overnight and now trades at 0.6290. Near-term support is eyed at the early-Sept lows just below 0.6250.
Resistance will likely be encountered on any rebound toward 0.6450. This afternoon’s release of the Caixin China manufacturing PMI will be the next big test for both the AUD and NZD.
The worst performing currency over the past 24-hours has been the GBP, losing almost 1% versus the USD.
Downward momentum in the GBP/USD was encouraged by the release of a weak CBI survey of British Industry, in the early hours of this morning. The GBP/USD currently trades at 1.5370 .
On the crosses, the most striking move overnight was for the NZD/JPY. This has slumped as is typical during times of heightened risk aversion. From 76.20 last evening the cross now trades around 75.50.
By contrast, the NZD/AUD made some gains late last evening, managing to hold on to much of the gain overnight. The cross now trades around 0.8890.
Support appears fairly well established close to the 0.8800 level. However, over the medium-term we see the cross breaking lower.
The China PMI will be key for the cross today. A disappointing release would likely take a greater toll on the AUD relative to the NZD.
Tonight, look out for a smattering of data releases including European and US Manufacturing PMI data.
Fed member Lockhart is also due to speak again today, though his comments will likely lack any ‘shock’ value given his views already gained wide coverage earlier in the week. ECB’s Draghi also has a quarterly hearing scheduled in Brussels.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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