By Kymberly Martin
The USD has pushed higher since the start of the week, with the JPY the greatest casualty.
The AUD and NZD have held up well, despite some early volatility.
Monday morning headlines announced that the head of the FBI had told US Congress his agency stands by its July decision not to recommend prosecution of Hilary Clinton over her private email server use, while Secretary of State. This caused a bout of volatility in most currencies. The ‘safe haven’ JPY was the most immediate casualty. From around 103.20 yesterday morning it now trades at 104.50.
While a Clinton victory is still far from assured the removal of this overhanging cloud helped our global risk appetite index rebound from 41% to 48%. Equity markets enjoyed a strong night on either side of the Atlantic, with the Euro Stoxx 50 up 1.85% and S&P500 up more than 2.0%, led by financial sector companies.
The EUR/USD and GBP/USD are both a little weaker. From close to 1.1140 yesterday morning the EUR/USD has now traded down to below 1.1040. Equally, the GBP/USD has traded down from above 1.2500 to below 1.2400.
The AUD/USD has been the strongest performer since the start of the week. After a burst of volatility yesterday morning, it consolidated during the day before pushing higher in the early hours of this morning. It now trades at 0.7700. The top of its range of the past few months is eyed at 0.7750. Today, the NAB business survey will give the latest insight into the state of this segment of the AU economy. Currently the market prices around a 40% chance of a further RBA cut within the year ahead.
After a flurry of activity yesterday morning, which briefly saw the NZD/USD spike above 0.7350, it settled into more pedestrian trading. It now sits around 0.7320.
On the crosses, the most notable move has been for the NZD/JPY. As risk appetite has improved the NZD/JPY has surged. From 75.50 yesterday morning the cross now trades at 76.50, its highest level since mid-July. The NZD/EUR has also enjoyed strong performance over the past 24-hours. At 0.6640, it now trades at the top of its range since July.
Ahead of Thursday morning’s RBNZ meeting, the fate of the NZD lies firmly in the hands of the US election.
The US goes to the polls tonight, with results expected to dribble out from early tomorrow afternoon (NZT). If the race is quite clear we may have a good indication of the result by 3-4pm. If it is very close, however, we may need to wait until 5pm, or later. A convincing Clinton win would likely see a further rebound in risk appetite, and the NZD supported. Alternative outcomes (unclear result or Trump victory) would likely result in the more pronounced market response. Risk appetite would be damaged and the NZD under pressure.
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