By Kymberly Martin
In reverse of the previous night’s trading, the JPY has returned to favour overnight, while ‘commodity-linked’ currencies have underperformed. The NZD/USD has been the weakest performer.
In a relatively light night for data delivery, moves in the global oil price took centre stage. WTI oil price futures declined around 4%, after Iran indicated it plans to boost oil production to its pre-sanctions levels before it will consider taking part in any talks to freeze production. More broadly the CRB global commodity index sits about 0.60% below Friday’s close.
The NOK, CAD, AUD and NZD were amongst the ‘commodity-linked’ currencies to trade lower overnight. From early evening highs above 0.6750, the NZD/USD has traded steadily down to around 0.6670 currently.
Support is now eyed at the 200-day morning average, at 0.6625, ahead of 0.6500. The currency may gain some respite overnight if the latest GDT dairy auction holds up as we suspect. Indicators for this auction are more positive than negative, but not by much. We look for a flat to small positive result for the overall price index.
The AUD/USD failed to push on beyond 0.7590 overnight. It has traded down to 0.7500 this morning. The most fundamental test for the currency this week will be Thursday’s AU employment report. Our NAB colleagues expect a solid report with an 18k employment change and unemployment rate falling to 5.9%.
The USD strengthened against its European peers overnight, ahead of the US FOMC meeting tomorrow night. Ahead of this the market prices virtually no chance of a hike this week, but almost an 80% chance of a 25bps hike by year-end.
The JPY was a little stronger overnight as risk appetite was more subdued. The focus for the JPY today will be the meeting of the Bank of Japan. Given the unintended sharp fall (circa 6.0%) in the USD/JPY after the BOJ’s last surprise rate cut announcement, the Bank may tread more carefully in announcing any further measures.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
2 Comments
Of course the dairy price will only "stabilise" when the extent of the increased Eurozone production is fully factored in .
Like New Zealand , Europe has the ability to produce way more milk than it can ever consume, but they were prevented from over-producing , with production quota ceilings which are now a thing of the past .
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