NZD was the best performing of the majors, although gains were modest; higher oil prices supported other commodity currencies; EUR the weakest of all majors

By Jason Wong

Commodity currencies outperformed on Friday, with the NZD leading the charge, while global rates fell.

Strong earnings results from a number of large tech companies sent US equities to fresh record highs and the VIX index back below 10.  Supporting the move was slightly stronger than expected US Q3 GDP growth of 3.0%, the only data release of note.  The USD was on the ascendency ahead of that release, adding further gains after the ECB’s dovish taper announcement the previous session.  The USD major currency TWI reached a fresh 3-month high after the GDP release, but was knocked back soon after following a headline that Trump was leaning towards Powell for the Fed Chair role, according to insiders.  Trump will announce his choice for the next Fed chair this week.

For a change, the NZD was the best performing of the majors, although gains were modest, closing the week around 0.6875, after earlier equalling the year-to-date low of 0.6818 on Friday afternoon.  There was no NZ specific news and it might be a sign that recent selling pressure has been exhausted.  With portfolio flows driving recent NZD weakness, the RBNZ will be obliged to see the weaker currency as an inflationary force when it releases its new set of forecasts on 9 November.

Other commodity currencies also outperformed on Friday, supported by higher oil prices.  Brent crude broke up through the USD60 per barrel mark for the first time since July 2015, rising by around 2% for day.  Australia’s government lost its razor-thin majority after the high court ruled against Deputy PM Joyce in his citizenship case, but the small negative impact on the AUD was short-lived.  Joyce looks set to regain his seat in a December by-election after renouncing his NZ citizenship and in the meantime the government has support on confidence and supply by at least one independent MP.  NZD/AUD ended the week on a positive note around 0.8960.

EUR was the weakest of the majors, falling as low as 1.1575 before finding some support and it closed the day down 0.4% at around 1.1610.  As well as the aftermath of the ECB meeting, political turmoil in Spain did the common currency no favours.  Catalan’s Parliament declared independence from Spain and this was followed by Spain’s government setting in motion the process of taking over the rebel region.  NZD/EUR closed the session up 0.9% at around 0.5925.

JPY continued to follow the path of US Treasury yields.  Lower rates saw USD/JPY fall 0.3% to 113.70, after earlier reaching a 3-month high of 114.45.

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