NZD up to 0.7220 USD and 0.9410 AUD; Mixed data saw USD move a touch lower, DXY down 0.1%; NZ Terms of Trade, China PMI, AU GDP and Trump's address key focus for the day

NZD up to 0.7220 USD and 0.9410 AUD; Mixed data saw USD move a touch lower, DXY down 0.1%; NZ Terms of Trade, China PMI, AU GDP and Trump's address key focus for the day

By Doug Steel

There has been a host of data out of the past 24 hours, the sum of which has seen the US dollar a touch lower. The DXY is down 0.1%, at 101.00.

JPY and CHF sit at the top of the currency leader board, as a whiff of ‘risk off’ circulates. Month end flows were likely also a factor. US equity markets are a touch lower, with the S&P 500 down 0.3%. Euro Stoxx 50 rose 0.3%. Markets await Trump’s address to Congress this afternoon (NZT).

The US data was mixed with Q4 GDP not revised up as expected and a larger flash trade deficit than was forecast offset by a surge in both the Chicago PMI and consumer confidence.

USD/JPY is down 0.6%, at around 112.00, having dipped as low as 111.70 at one point. The pair seriously tested its 100-day moving average (around 111.90). This year’s low is down at 111.60. EUR/USD rose 0.2%, to around 1.0610.

The NZD made headway overnight despite the mild risk off undertones. After pushing up toward 0.7240, NZD/USD is currently up 0.3%, at around 0.7220, in a move toward our fair value estimate. Even with risk appetite easing it remains above average, keeping our NZD/USD short-term fair value model sitting up around 0.74.

NZD has also outperformed on the crosses, perhaps helped by month-end flows. NZD/GBP is 0.6% to around 0.5810. NZD/AUD also made steady progress through the night, poking up toward 0.9420 at one point, before settling back. The pair opens this morning around 0.9410.

Today, NZ’s Q4 terms of trade data this morning is expected to be strong (on prior dairy price gains) but likely to be of second order importance. We note strong NZD/USD support around the 0.7130/45 area where the 50-day, 100-day and 200-day moving averages have congregated. The post-RBNZ high toward 0.7250 is notable on the topside.

AUD/USD is flat at around 0.7670. AUD’s fate today lies in the balance of the USD’s performance post Trump’s address, the AU Q4 GDP outcome and the raft of Chinese PMI data due mid-afternoon. For GDP, market expectations have nudged up to +0.8% q/q following yesterday’s data; our NAB colleagues expect +0.9% with upside risk. These events will also have a major bearing on the today’s performance of the NZD and NZD/AUD.


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