The USD showed a broadly-based rally on Friday on stronger growth and inflation data, with the DXY index up 0.9%.
All the key US data releases were positive for the USD, with the second reading of Q4 GDP revised up to an annualised 1%, stronger gains than expected for January personal income and spending data, stronger than expected consumer sentiment and last, but not least, a stronger reading for inflation on the Fed’s preferred measure – the core PCE deflator came in 0.2% higher than expected at 1.7% y/y.
These data led the market to price in more chance of the Fed easing this year, driving US rates and the USD higher, and US equities down slightly. Meanwhile, euro area data were soft, with the EC survey showing weaker than expected economic confidence and provisional inflation data for February undershooting estimates for Germany, France and Spain.
EUR/USD fell by 0.8% to close the week at 1.0934, while GBP/USD fell by 0.7% to 1.3871. Brexit concerns remain at the forefront of mind for GBP, but after the significant downward pressure earlier in the week, selling pressure has eased, evidenced by EUR/GBP range-trading over the last couple of trading sessions.
USD/JPY rose by 0.9% to 114.00, reflecting the broad-based USD rally. Japan inflation data continued to track well below target, so further policy easing remains widely expected.
During local trading on Friday, the NZD was well bid, rising by about a cent throughout the day. Better-than-expected NZ trade data helped, but the NZD had strong momentum before that release.
The currency broke out of the tight 0.6550-0.6750 range it had held for the previous three weeks, reaching a high of 0.6775 and triggering various stop losses in the process, particularly against the AUD, where investors were positioned for a stronger AUD/NZD cross. However, sanity soon prevailed and the NZD began falling, while the strong US data kicked off a much larger decline. By the NY close, the NZD had shed 1.4% to 0.6629, taking the NZD back below the mid-point of that 3-week range.
The AUD followed a similar trajectory, falling 1.5% to 0.7126, leaving NZD/AUD up a touch at around 0.93.
Finally, the G20 Statement that emerged in the weekend, offered nothing really to calm or inspire financial markets. There were no detailed plans about how the policymakers were going to drive economic growth. New language on exchange rates added the comment “we will consult closely on exchange markets”, after reiterating that members would refrain from competitive devaluations. Whatever. I can’t see BoJ’s Kuroda discussing his next move with 19 other countries before he takes the policy rate further into negative territory.
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1 Comments
The title of the article has left me totally confused "...but stop-loss triggers put it (the price) back in it's cage."
If you're shorting the Kiwi and have a stop-loss to the upside in place, then your positions are closed by buying back the short position. Buying does not make a price fall!
And who would put a stop-loss to the upside if you have a long position? I guess they just shorted it with a vengence at a higher price to pull back down again to where they have orders to keep sitting. Talk about a false market!
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