It was deadly quiet last night, with little data and little news to drive markets in this holiday-shortened week. The USD continued to recover after its post-FOMC sell-off and is stronger across the board.
The only data release of note last night was US existing homes sales, which fell 7.1% in February to 5.08 million. This was weaker than expected, but not important enough to have any market impact.
US equity markets have had a great run recently and, as they approach previous highs, there appears little appetite at the moment to take them higher. Flat US equity markets at the time of writing followed some small falls across European markets.
The NZD is down 0.6% from Friday’s NY close at around 0.6760. Much of the damage was done during the local trading session. This seemed to coincide with oil prices tracking lower for no particular reason. Indeed, oil prices have since recovered, but the NZD remains close to the lows for the session.
Oil prices have sustained their strong recovery through February and early March. Some unexpected supply outages in a couple of regions, coupled with falling US production have closed the gap between supply and demand, leading many to proclaim that the worst is over for the sector. We shall see.
NZD/AUD is down 0.3% to 0.8915, as the NZD underperformed. There still seems to be interest for speculative accounts to be long AUD/USD, a trade we favour, based on the improved economic fundamentals for the currency pair – much stronger commodity prices for Australia versus NZ of late, and NZ-AU 2-year swap rates converging.
The focus for the AUD will be on Governor Steven’s speech delivered early this evening. There’s the opportunity for him to jawbone the AUD lower after its recent strong recovery. Lack of any attempt here could see the AUD higher.
GBP was one of the weakest majors, falling 0.6% to 1.4395, as Brexit risks were forefront of mind. A senior member of the UK government and pro-Brexit supporter, Ian Smith, resigned on Friday, while the Confederation of British Industry reported that leaving the EU would cost the UK GBP100 billion in lost economic output and 950,000 jobs by 2020.
The EUR and Yen both slipped a little against the USD, with EUR/USD at 1.1250 and USD/JPY at 111.80, close to its highs for the day.
Overnight, US and European preliminary PMI data are released as well as Germany’s IFO survey, so we’ll be hoping for a bit more price action in currencies to report on.
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