By Doug Steel
The US dollar was under downward pressure most of the night, following generally disappointing data. While durable goods were a touch stronger than expected at a headline level, core orders fell against the reasonable gain anticipated. Pending home sales fell 2.8%, the largest fall in a year. Some positive comments from the Fed’s Kaplan saw the greenback trim losses back to around flat.
Meanwhile, US officials were reported saying Trump will propose a 10% lift in defense spending in the upcoming Budget plan, offset by cuts in discretionary spending elsewhere. The President said in a speech to governors overnight ‘we are going to start spending on infrastructure, big’. But without more details markets shrugged it all off, seemingly awaiting the President’s speech to Congress tomorrow afternoon NZ time. US equity markets managed to edge marginally higher (major indices around +0.1%%), while the Euro Stoxx 50 is up 0.2%.
In contrast to the US, European data remained positive with confidence gauges broadly meeting lofty expectations. EUR/USD punched has high as 1.0630 overnight, before settling back to be up 0.3% at around 1.0590.
The JPY has weakened this morning as US yields have pushed higher. USD/JPY is up 0.5%, currently sitting around 112.70.
In the NZ session yesterday, the GBP came under selling pressure on headlines that the UK is preparing for the possibility of a call for another Scottish Independence vote in March. To us, there is not that much in this in and of itself, but it highlights the political risks circulating and was an excuse to sell the pound. From around 1.2470, the GBP/USD was rapidly marked down below 1.2400 before finding some support (aided by a sharp jump UK service sector pricing intentions). The move was fully reversed overnight, aided by the softer US data. GBP/USD opens this morning around 1.2450 this morning.
The NZD remains range bound, ignoring yesterday’s record net migrant inflows and downwardly revised Q4 retail sales. There is the potential for some movement today with this morning’s merchandise trade data (we look for a small trade surplus against market expectations of a small deficit), although there will likely be more focus on the ANZ business survey this afternoon where we think the inflation gauges will continue to push higher. The NZD/USD opens this morning around 0.7200. We remain comfortable with our 0.70 to 0.74 trading range for NZD/USD over coming months.
AUD gained mild support, on balance, from yesterday’s mixed data showing a small Q4 inventory drag, a decline in aggregate wage payments, but a hefty kick up in profits. AUD/USD briefly poked through 0.7700 early evening yesterday, before settling back. The last of the partial data is due today, with focus on net exports and government spending data ahead of AU GDP tomorrow. AUD/USD currently sits around 0.7680. NZD/AUD opens this morning close to 0.9380.
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