USD has wriggled higher, adding to the recovery it started late last week; NZDUSD pushed slowly higher yesterday reaching 0.7410 before drifting lower; AUD slightly outperformed the NZD overnight, checking the recent gains in NZDAUD

By Doug Steel

A very quiet day yesterday. So quiet it took a fair amount of Monday morning before the NZD even traded. China and Hong Kong markets were closed for Lunar New Year holidays. The market slumber continued overnight with the US out for Presidents’ Day holiday.

In Europe, government bond yields have pushed up and stocks are lower. The Euro Stoxx 50 index is down around 0.6%. US equity futures are down smalls. Oil prices have extended gains made late last week, up around 1% on the day. But with no data and little news, currency moves have been minor across the board.

The USD has wriggled higher, adding to the recovery it started late last week. But you have to squint to see the move up on a chart. It is marginal stuff with the DXY US Dollar Index up 0.1%.

Following steep falls over the past few weeks, USD/JPY has found some composure up 0.2% from yesterday’s local close. The pair currently sits around 106.60, a full cent up from last week’s low. There was no market reaction to yesterday’s better than expected Japanese trade data.

EUR/USD dipped to around 1.2370 at one point overnight, with no obvious trigger, but has since recovered to be little changed on the day at around 1.2410. GBP/USD is down 0.3% from yesterday’s close, currently sitting around the 1.4020 mark. There is potential for some GBP movement ahead with BoE governor Carney talking tonight and again later in the week, ahead of next week’s speech from PM May on her vision for a Brexit trade deal.

Commodity currencies were initially supported yesterday helped by rising oil prices, but seemed to lose favour overnight as European stocks slid.

NZD/USD pushed slowly higher yesterday, showing no fear of the approaching ex-tropical Cyclone Gita. After getting to around 0.7410 yesterday, NZD/USD has since drifted lower. The pair had already posted its low for the night, under 0.7360, before a survey showing NZ house price expectations are at a six and a half year low was published. NZD/USD opens this morning around 0.7370. A key level of resistance remains at 0.7440. A break up through that would open up last year’s high of 0.7558. On the other side, any decent support level is some way away coming in at around 0.7200.

NZ’s PSI released yesterday came in at 55.8 for January compared to December’s 56.0. Combined with last Friday’s PMI, the recent trends are solid enough but consistent with the slowing in near-term GDP growth that we anticipate. Nothing there to excite the market.

Today’s NZ producer price inflation data is unlikely provide excitement either. The GDT dairy auction overnight has more potential to cause movement if it was substantially different from indicators and our expectation of a flat to small rise.

AUD slightly outperformed the NZD overnight, checking the recent gains in NZD/AUD. But like other currency moves, they were minor. NZD/AUD sits around 0.9320 this morning well within the 0.90 to 0.94 range that has contained it for the past three months. No major new news is expected from today’s RBA minutes, with a little more interest in tomorrow’s AU wage data.

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