The USD has found further support after reaching a nadir on Friday. Three positive days in a row for the USD has been a rare event this year. The major currency TWI is up 0.5% for the session, taking its cumulative gain since the intraday low on Friday to 1.5%.
The NZD has traded in a tight range overnight and sits this morning around 0.7350, near its 5pm level yesterday and down a touch over 24 hours. The overnight GDT dairy auction was expected to show a fairly flat result and that was the case, with the average price index down 0.5% and whole milk powder prices up 0.3%. This follows strong price gains earlier this year. We aren’t optimistic about pricing for the months ahead, as large EU stockpiles of skim milk powder continue to overhang the market and elevated EU milk production remains a headwind that is likely to persist.
NZD/AUD fell away yesterday afternoon down to a low of 0.9285 before adding back on 50pips and then retreating again. There were no obvious drivers for the swing around. It sits this morning just above the 0.93 mark.
GBP has been the strongest of the majors, as talk surfaces about the UK possibly getting a bespoke trade deal with the EU. An article in Business Insider UK suggested that the European Parliament will allow the UK to have privileged single market access post-Brexit. It sounds like a practical, common sense solution to us and the more we read on Brexit some pragmatism seems to be coming into play from both sides. If this view gains traction, it would support our call for GBP to continue to recover a lot further that would ultimately see NZD/GBP trade a lot lower. GBP is back above 1.40 and NZD/GBP is down slightly to 0.5250.
A generally stronger USD sees USD/JPY up to 107.25 and EUR/USD down to 1.2350, with the NZD crosses for these slightly higher.
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