Investors felt chirpy on the first day of spring for the Northern Hemisphere, with risk back on the table, with decent gains in equities and a weaker Yen.
Crude oil prices are up to their highest level since early January, as the market awaits a possible output agreement amongst the large producers.
China’s policy easing via a cut in the RRR late on Monday helped support markets, but an added boost came via a better-than-expected US ISM manufacturing index and strong construction spending data. While still below the 50 mark, at 49.5 the ISM indicator was much better than many feared and it signalled a potential bottom in US manufacturing activity. The 51.5 new orders reading was high enough to suggest a better outlook.
Earlier in the day, China PMI data continued to disappoint, although the incremental policy easings by a government determined to support growth meant that the market impact was muted. Final PMI data for Europe were close to expectations, while UK manufacturing PMI was much weaker.
With US and European equities up in the order of 1.5-2%, the risk-on mood has dampened appetite for the Yen, with driving USD/JPY up 1.2% to 114.00.
EUR continues its soft run ahead of an expected ECB policy easing next week, while GBP is finding some support after potentially becoming oversold last week on Brexit fears. The market largely ignored the weak UK PMI data. GBP/USD touched 1.40 at one stage and is currently up 0.3% at 1.3955.
The NZD has range-traded overnight and is currently up 0.3% at 0.6610.
The latest GDT dairy auction showed an average price gain of 1.4%, with whole milk powder up 5.5%. This was in line with expectations, but it looks like some anticipated a larger recovery, with the NZD dipping 30-40 pips on the news, albeit that proved to be temporary.
The currency is expected to continue to range trade for the rest of the week, with US payrolls data on Saturday morning offering the next best chance to break out of the well-established 0.6550-0.6750 range.
The RBA’s latest policy statement had little impact on the AUD and it has traded more or less in line with the NZD, with NZD/AUD flat at 0.9230. The RBA repeated the line that “the exchange rate has been adjusting to the evolving economic outlook”, about as bland a currency comment a central bank could make.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
BNZ Markets research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.