Amidst a quiet news day, the USD has lost some lustre after its strong run and is down against most of the majors, falling by 0.3% on a TWI basis. Commodity currencies and GBP are the best performers.
The S&P500 index is currently up 0.6%, rising to a record high, surpassing the previous mid-August peak, led by strong gains for the Energy sector. Oil prices are up over 4% as the probability increased of an OPEC agreement to cut production at the end of November. Iraq's Oil Minister said that it would put a new proposal on the table and Iran's Oil Minister said that it is “highly probable” members will reach a consensus on production cuts. Higher oil prices have helped support commodity prices in general, with Bloomberg's commodity price index up 2% on the day.
The commodity currencies are all higher, led by a 0.7% gain in the NZD to 0.7060. Yesterday morning it dipped below the 0.70 mark to a 4-month low of 0.6985. There is strong technical support around the 0.6950 level. Amidst some widespread post-Trump currency forecast changes in conjunction with NAB, we left our NZD and AUD projections unchanged, still seeing year-end targets of USD0.72 and USD0.75 respectively. In NZ's case we recognise the positive domestic forces, including the trifecta of positive releases on Friday and the seasonal lift the NZD tends to enjoy in the second half of December.
NZD/AUD is up probing the 0.96 handle, which has been our year-end target for some time. That said, with NZ's economic data flow remaining more positive than Australia, a further probe higher wouldn't come as a surprise.
EUR broke its 10-day losing streak to be up 0.2% at 1.0610, although at the time of writing there was still four hours to go until the NY close so that could change. We see political risk defining the path of EUR over coming months and that could easily see EUR/USD sub-parity, resulting in NZD/EUR probing the 0.70 handle, a level we saw briefly in early 2015.
The top currency performer for the day is GBP, which is up 1.1%, breaking up through 1.25 at one stage. Earlier in the session PM May signaled that she may be open to a transitional trade deal with the EU, which plays more to the hand of a “soft” than “hard” Brexit.
JPY is flat around the 111 mark.
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