By Kymberly Martin
The NZD has been amongst the strongest performers over the past 24-hous while the GBP has been the weakest. The USD index has pushed a little higher in the early hours of this morning.
The USD regained a bit of composure overnight, after the previous night’s undignified fall. From early evening lows of 94.70 the USD index now trades back above 95.00.
The GBP/USD has been under pressure since last evening. It initially dropped after the release of a handful of UK data. Although these were mixed, the market chose to focus on weak July manufacturing data. Early this morning, Bank of England’s Carney testified to a Treasury Select Committee. He justified the Bank’s post-‘Brexit’ action to further ease policy. He noted that although the UK economy is a bit stronger in Q3 than the BoE had forecast it is still only growing at around half its pre-referendum rate. The door to further easing was left open. The GBP/USD has traded down to 1.3320.
After a gap higher late yesterday morning, the JPY consolidated then traded a little lower in the early hours of this morning. The USD/JPY now trades at 101.80. Technically there remains very solid support at the 100.00 level, which has marked the lower-end of its trading range since mid-year.
The AUD/USD showed limited response to the release of AU Q2 GDP yesterday. At 0.5%q/q (3.3% y/y) this was close enough to expectation not to create too many ripples. Government spending made a surprise positive contribution. Otherwise growth by expenditure category was mixed. The recovery in the non-mining economy continued. The AUD/USD trades at 0.7670 this morning ahead of scheduled remarks by RBA’s Lowe at a Sydney conference this morning.
Whilst the AUD/USD has traded a reasonably tight range over the past 24-hours the NZD/USD has pushed on higher. It touched highs above 0.7480 in the early hours of this morning. It now trades at 0.7450.
The NZ TWI sits just below 79.00. It continues to move against the RBNZ’s assumption, and desire, for a weaker currency. However, RBNZ language on the TWI has been moderating over recent quarters. The word “high”, for example, has been used more recently rather than the “unjustified”, “unsustainable”, “over-valued” terminology used through 2013-2014. The Bank has also talked of the exchange rate “needing” to depreciate, rather than “expecting” it to.
The RBNZ is most concerned when NZD strength departs from weaker domestic fundamentals. Currently the pick-up in the NZD can partly be justified by the recent strong pick-up in NZ’s terms of trade, driven by a 45% increase in NZ dairy prices.
The domestic calendar is bare today. Tonight the meeting of the ECB will likely steal the limelight.
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