It was a quiet end to the week, with the USD slightly stronger across the board.
There was little news or economic data on Friday to rock the market.
Most investors were likely still stunned by the surprise back-down on the rates outlook by the FOMC on Thursday and were busy reassessing views on the outlook for the USD.
With mixed communications from the Fed and an air of confusion – not the only central bank delivering such messaging, I might add – it was not obvious whether one should be buying or selling US dollars.
In the end, those who thought the USD was probably oversold in the aftermath of the FOMC meeting won the battle, with the USD DXY index rising by 0.3%, after its post-FOMC fall of about 2.2%.
The EUR fell back below the 1.13 mark and closed the week down 0.4% at 1.1270. ECB Board Member Praet said that the bank could cut rates further in response to a negative shock, highlighting that “…we have not reached the physical lower bound”. Praet was likely keen to get this message across, following the Euro’s rise after Chairman Draghi said that he didn’t anticipate reducing rates further, after cutting rates earlier this month.
JPY and GBP were fairly stable against the USD, closing the week at 111.55 and 1.4476 respectively.
The AUD and NZD underperformed, down 0.5% and 0.7% respectively, following strong gains over the previous two sessions.
The NZD closed the week a shade over 0.68, having reached its highest level since the end of last year on Friday afternoon of 0.6874.
The AUD and NZD were temporarily well bid on Friday afternoon after China’s CNY set. The PBoC set the Yuan 0.52% stronger against the USD, the biggest gain since November and the third largest appreciation since the Yuan was de-pegged from the US dollar in 2005. However, the reset magnitude reflected the prior strength of the Yen, Euro and several emerging market currencies, so that on a currency basket basis, the Yuan still depreciated on the day.
The 0.69 mark for the NZD represents a strong area of technical resistance, having failed to break that mark at its October and December peaks and again on Friday.
It is a quiet week on the economic calendar across NZ, Australia, China and the US so it is hard to see economic data driving currencies in pre-Easter trading. The fate of the NZD this week will likely remain at the whim of market sentiment.
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