By Kymberly Martin
As the dust is settling on the US election outcome the USD has strengthened further. The NZD has been one of the weakest performers. The GBP has been the standout performer.
The USD extended its gain overnight. The Bloomberg USD index, near 98.80, trades close to its late-Oct highs. Consequently the EUR/USD has slipped further. From early evening highs above 1.0940, it now trades near 1.0880.
Fed’s William’s was quoted last evening saying he believed the Fed was close to achieving its goals. He suggested inflation should be back to its 2% target in the next year or two. In a somewhat pointed comment he said it was “fortunate” that there was independence at the US Central Bank. Overall, the market still prices almost an 85% chance of a Fed hike at its December meeting. If market volatility remains contained in coming weeks there now seems little to throw the Fed off this course.
The GBP/USD is the somewhat bashful winner from recent market events. Perhaps relieved that the ‘Brexit’ vote is no longer the key topic of conversation the GBP/USD has pushed higher. The GBP/USD now trades at 1.2550, up from late evening lows of 1.2380.
The NZD/USD has experienced a bit of volatility over the past 24-hours. It initially gapped higher as the RBNZ announced the OCR yesterday morning, in what could be interpreted as a ‘hawkish cut’. This was despite the RBNZ reiterating its now obligatory line that; “A decline in the exchange rate is needed”.
However, as the day progressed and the USD came to the fore, the NZD/USD did indeed decline. The NZD/USD now trades around 0.7220, down from immediate post-RBNZ highs above 0.7350. Near-term technical support remains just below the 0.7200 level. Resistance will likely be encountered on any move back up to 0.7300.
Today the NZ October manufacturing PMI will be released. Recall, it was surprisingly high at 57.7 in September. However, it is unlikely to be a dominant market mover. We anticipate that focus will remain firmly on global, and particularly US, developments in the trading sessions ahead.
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