After a strong run, the USD has finally met some resistance and is weaker across the board. The USD TWI is down about 0.4% after reaching a 7-month high yesterday.
There hasn’t been a lot of global economic news to drive markets. Newswires have made a lot of the weaker China trade data, but that largely reflects a lack of news elsewhere. China’s export and import growth were both weaker than market expectations, signalling a weaker China and global economy.
On a more positive note, weekly US jobless claims fell to their lowest level since the series began in 1948, after adjusting for population, signalling further tightening in the US labour market.
JPY has performed well in the “risk-off” environment, with USD/JPY down 0.6% to 103.50. But with the USD weaker across the board, this isn’t your classic risk-off move, with NZD/USD nudging close to 0.71, at the top of the tight trading range it has been in over the past 48 hours.
Data yesterday showed a fresh high in the manufacturing PMI, higher-than-average consumer confidence and a stronger-than-forecast fiscal surplus that gives the government lots of options as we head towards next year’s general election. All these domestic factors are NZD-positive, but our projections for a slightly weaker NZD through the next year are driven by global factors.
The AUD has underperformed during this period of USD weakness and is flat at 0.7570. This puts NZD/AUD at 0.9375 and in a stronger technical position, as it tested and twice couldn’t sustainably break the 200-day moving average of 0.9330.
EUR fell to a low of 1.0985 last night but broad USD weakness has seen it recover to 1.1045. For a change, GBP has been out of the spotlight and it has recovered to 1.2250.
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