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Better-than-expected US retail, and bounce in the oil price buoys the USD. AUD also strengthens. These combined to press the NZD lower

Currencies
Better-than-expected US retail, and bounce in the oil price buoys the USD. AUD also strengthens. These combined to press the NZD lower

By Kymberly Martin

The USD was stronger on Friday night. The CAD was the star performer while the NZD was worst, dropping around 1.6% against the USD, from Friday morning highs.

A better mood prevailed on Friday night across markets. Our global risk appetite index (scale 0-100%) tentatively rebounded from 16% to 19%, aided by a better-than-expected US January retail sales report and a bounce in the global oil price.

Oil had a strong end to the week following comments late on Thursday from a U.A.E. energy minister saying OPEC members were ready to cooperate on possible production cuts. But they hoped to engage those outside of the cartel, too. Oil prices were also boosted on Friday night after oil services company, Baker Hughes reported US oil rig count fell by 28, the eighth consecutive weekly decline. However, previous rumours of cooperation between oil producers have resulted in little action. The oil price will likely find it difficult to extend its gain (futures up 12% on Friday) without solid evidence of supply constraint.

The Euro Stoxx 50 and S&P500 closed up 2.8% and 1.9% respectively, led by energy and financial sector companies. Credit spreads also narrowed. In currencies, the CAD outperformed as the oil price rallied.

Overall the USD was stronger, gaining a boost from the US retail sales report. The tone of this report made a pleasant surprise compared the recent trend of US data disappointments. The USD was even able to gain a little against the recently unstoppable JPY. From early evening lows near 111.70 the USD/JPY ended the week at 113.20.

The NZD was the weakest performer relative to its peers on Friday. Weakness set in from early in the day when the NZD/USD failed to break through range-highs at 0.6740. The downward momentum persisted overnight as the USD broadly strengthened. The NZD/USD ended the week just below 0.6630.

The NZD/AUD was also notably weaker, as the AUD held its own against the USD while the NZD declined. From early evening highs above 0.9400 the NZD/AUD traded down to end the week at 0.9320.


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Kymberly Martin is on the BNZ Research team. All its research is available here.

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