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NZD is down 0.5% from this time yesterday to 0.6835 USD; soft China PMI data added to the woes of the NZD and dragged down the AUD as well; euro-area economic data showed a strong economy but weak inflation

Currencies
NZD is down 0.5% from this time yesterday to 0.6835 USD; soft China PMI data added to the woes of the NZD and dragged down the AUD as well; euro-area economic data showed a strong economy but weak inflation

By Jason Wong

There has been a plethora of economic data released over the past 24 hours, only some of it market-moving. Commodity currencies have underperformed while global rates have barely moved.

The NZD is down 0.5% from this time yesterday to 0.6835, with much of the damage done during local trading hours.  The ANZ business outlook survey showed a further fall in confidence and activity during the period of coalition negotiations but that was hardly news and another – potentially meaty fall – can be expected when the next survey comes out that post-dates the formation of the new government.  The data was further fuel for those looking for reasons to sell the NZD as we’ve consistently seen since the election.

Soft China PMI data added to the woes of the NZD and dragged down the AUD as well.  The report suggested that efforts to clean up the environment were a factor, consistent with President Xi’s call for quality of growth, rather than quantity.  Later, PM Ardern announced that foreign speculators won’t be able to buy existing NZ houses, but this had little market impact.  The proposed change is in line with other countries like Australia and the scope of the restriction is much more limited than the track the government could have gone down.

The NZD is barely lower from the local close while the AUD has pushed on down towards 0.7650.  This saw NZD/AUD return to 0.8950 overnight and it is now at 0.8930, up slightly from the local close.  CAD’s underperformance can be traced to weaker than expected GDP data, not the first weak indicator since the BoC embarked on a tightening cycle.  This sees rate hike expectations pushed out further into 2018 and USD/CAD up through 1.29.  NZD/CAD is flat for the day around 0.8820 and up from the local close of 0.8790.

Of the other majors, GBP is the strongest, JPY the weakest and EUR/USD flat.  GBP is up 0.5% ahead of the widely anticipated BoE hike later this week and reports that EU’s chief Brexit negotiator Barnier saying that he’s ready to speed up Brexit negotiations.  A spokesperson for PM May said that preparatory work for Brexit “has seen a significant acceleration in recent months”.  NZD/GBP is down over 1% for the session to 0.5150, a level not seen since the day of the Brexit referendum.

There was little market reaction to euro-area economic data which showed a strong economy but weak inflation.  GDP was slightly stronger than expected while the unemployment rate surprisingly fell to 8.9%, the lowest since early 2009.   But underscoring the challenge of the ECB, CPI inflation came in slightly softer than market expectations, as forewarned by yesterday’s Germany CPI data, while the miss for the core rate was even greater, falling  below 1% to a 5-month low. The softer NZD sees NZD/EUR down to 0.5865.


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