By Kymberly Martin
The USD gapped lower on the prepared speech by US Fed Chair Yellen, early this morning.
The NZD has been the strongest performer over the past 24-hours by some margin.
As trading volumes return to normal after the Easter break, the USD had been on the back foot for much of the night. However, it was Yellen’s speech that dealt it a real blow. Rather than pushing back on the market’s recent dovish assessment of the Fed’s position, she simply confirmed that view . The USD index gapped more than 0.5% lower.
All of its peers were beneficiaries, but it is the NZD/USD that has enjoyed the strongest performance. Since this time yesterday morning it has gained around 1.9%, to trade at 0.6850 currently. Resistance is eyed approaching 0.6900, the top of the range since the NZD/USD found a base in September last year.
Strength in the NZD/AUD has also been striking. From afternoon lows near 0.8920 the cross now trades around 0.8990. It has reversed a good chunk of its post-RBNZ plunge. There is not too much on the agenda on either side of the Tasman today that is likely to impact on the cross. However tomorrow will bring the domestic data highlight for the week, the ANZ business survey. If it encourages the market in its rate cut expectations it might help to stall the NZD’s current upward momentum.
After the fall in the USD early this morning, European currencies also gained a boost. The EUR/USD that had been browsing around the 1.1200 level overnight, suddenly found itself above 1.1270 in recent trading. Similarly, the GBP/USD has traded from evening lows near 1.4200 to sit near 1.4380 at present.
The next test of sentiment toward the USD will be tonight’s US ADP employment report. Although not necessarily a good guide to the subsequent US payrolls release, the market tends to look to it for a lead in this regard. Then it will be all eyes on Friday’s payrolls.
Get our daily currency email by signing up here:
Kymberly Martin is on the BNZ Research team. All its research is available here.