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A rebound in oil prices and hints of further easing by ECB President Draghi led a rise in risk appetite and this has supported commodity currencies over the past 24 hours.
One of the perils of writing this report is that things can move quickly and it can become out of date by the time the “send” button is hit. Yesterday was a classic example, with a rebound in oil prices driving US equity markets and the commodity currencies higher during the morning. That trend has continued.
Oil prices are up over 5% with Brent crude trading around the $29.40 mark and well up from the low of $27.10 yesterday morning. This could well be just a case of a rebound from an over-sold position after the pummelling of recent weeks, while a report suggested US inventories had gained by less than expected.
European equities are up in the order of 2% while the S&P500 is currently up 1.3%.
The big event of the night was the ECB’s policy meeting, where monetary policy was left unchanged. However, President Draghi delivered some hopeful comments for those looking for additional policy medicine in March. He noted that “…it will be necessary to review and possibly consider our monetary policy stance at our next meeting in early March when new staff macroeconomic projections become available”.
This was followed by noting the ECB has “..the power, determination and willingness to act...there are no limits to (achieving price stability)...and we have plenty of instruments as you know”.
Following Draghi’s comments EUR/USD plunged from circa 1.0900 to 1.0780 before recovering to the current level of 1.0840. This flowed through into a weaker GBP/USD, which fell to its lowest level in almost seven years of 1.4080, before rebounding to 1.4215.
With the rebound in commodity prices and improved market sentiment, the NZD has been one of the best performing currencies over the past 24 hours or so.
NZD/USD is up 1.2% to 0.6505. Since the start of the year, the move from 0.6880 to 0.6400 has effectively been a straight line, so it would be most unusual not to see some sort of consolidation before the next move lower. Our short-term model suggests the 0.62 mark would represent fairer value but it won’t be a straight line down to that level.
The bellwether of global risk appetite, NZD/JPY, is up 1.8% to 76.5. The weaker EUR helped drive NZD/EUR up 1.6% to 0.6000.
The AUD/USD was also well supported in this environment, temporarily breaching the 0.70 mark this morning, and up 1.2% for the day. NZD/AUD has largely range traded and is flat at 0.9310.
CAD was the best performing major currency, with its more direct exposure to oil prices. USD/CAD is down 1.5% to 1.4290.
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