NZDUSD trading at 0.6970, below the 0.70 level it was holding for the last few days, despite good QSBO and GDT numbers; AUD worst performer of the day, with NZDAUD trading at 0.9225

By Jason Wong

There have been a few bits and pieces of news, but the markets have traded in a fairly random fashion.  There has been talk of Trump resurrecting his healthcare bill in a way to placate his fellow Republican renegades which, if successful, would be a win and get his policy agenda back on track. The Fed’s Lacker, an FOMC non-voting member this year, resigned over a confidentiality breach of some five years ago.  The economic data that have been released have largely been ignored. 

With all that, the USD is up slightly, equity markets are fairly flat, the VIX index is down slightly and US Treasury yields have nudged up after their decent fall of late.

With slightly higher risk appetite, a strong QSBO and a surprise lift in dairy prices, one might have expected the NZD to make up some of the ground lost in March.  But fundamental factors are not driving the currency at present, so maybe we shouldn’t be that surprised to see the NZD lower on almost all the crosses, a continuation from the theme of March.

The NZ quarterly survey of business opinion showed a series of robust activity indicators, further signs of strains on capacity, particularly the labour market, and painted a picture of rising inflationary pressure.  The market didn’t react.  It also didn’t react to the 1.6% increase in the GDT dairy auction price index, driven by a 2.4% rise in whole milk powder.  We had thought the balance of risk was weighted towards a slightly soft auction.  The NZD has trended lower over the past 24 hours and is currently probing the 0.6970 level, falling on all crosses apart from NZD/AUD.  There is strong technical support about a cent lower, just under the 0.69 mark.

Yesterday the AUD got a temporary boost from much stronger than expected trade data, but it fell following the RBA policy announcement.  The market honed in on the bank’s comments about the softer labour market and the macro prudential restraints to alleviate housing market stresses.  Governor Lowe’s comments later at a Board dinner were focused on the housing market, chiding the banks for their lax lending standards, lamenting the high levels of household debt, and signalling that the government should do more work to alleviate upward pressure on house prices.  The AUD fell over half a cent in the hours after the RBA’s announcement but found some support around the 0.7550 mark.  NZD/AUD has traded in a 60pip range (roughly 0.9190-0.9250) and currently sits flat around 0.9225.

The euro and yen are little changed against the USD, while GBP has continued to nudge lower, currently around 1.2450. 

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