Markets take a breather and wait for next round of data

by Kymberly Martin

NZD

The NZD/USD re-tested support at the 0.7500 level twice over the past 24-hours, to trade around 0.7550 currently.

Unsurprisingly, NZ business confidence dipped in yesterday’s National Bank’s May survey (activity outlook 34.9 in May vs. 36.1 in April). 

Surprisingly, it remains so strong. It continues to amaze us that a domestic business community which has faced so many hurdles over the last year or so, remains so optimistic.

Still, as anticipated the data had little impact on the NZD that continues to look to global events for direction.

To this end, market sentiment overnight displayed a rather pregnant pause (see Majors). With some relief from the constant battering from rising risk aversion the NZD/USD traded relatively sideways. It trades around 0.7550 currently.

Key support at 0.7500 held overnight and we continue to eye support at this level. Bounces towards 0.7650 will continue to be met with strong selling interest.

The NZD/EUR also paddled sideways though the NZD managed to make some ground relative to a weak GBP overnight. The NZD/GBP traded up from 0.4850 to above 0.4890 at present, now 2.5% off its mid-May lows.

Today’s NZ terms of trade data is unlikely to move markets.

The release of the ANZ commodities index may get a look in however, given market interest in recent price falls.

We expect today’s data will highlight further falls in Q2. Tonight, the key risk for the NZD/USD would be a weaker-than-expected US noon-farm payrolls release.

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Majors

Markets have taken a bit of a breather over the past 24-hours with trading ranges mostly quite tight. The JPY was the outstanding performer, with the GBP the weakest.

Overnight, markets appeared to be licking their wounds after recent heavy falls.

Equity markets are flat in Europe and the US. Our risk appetite index remained stable at a low 39%. Neither European of US data were remarkable however. German unemployment was shown to tick down from 6.8% to 6.7% (likely in stark contrast to the Eurozone measure to be released tonight).

Eurozone CPI dropped to 2.4%y/y in May. Later in the night, the US Chicago PMI dropped from 56.2 to 52.7 (56.8 expected), but remained in expansion territory.

The usual European headlines were doing the rounds, including the release of a poll showing 85% in Greece want to stay in the Euro.

However, the key question to be decided at the July 17 election will be whether they are willing to pay the price of continued inclusion.

The EUR/USD briefly traded above 1.2420 before returning to 1.2370 currently.

The JPY has been the strongest performer over the past 24-hours, likely benefiting from residual ‘safe haven’ interest as the market remains poised for its next hurdle. The USD/JPY fell from around 79.10 to trade below 78.40 this morning. It is now at its lowest level since mid-February.

The AUD/USD has traded quietly sideways over the past 24-hours, to be up slightly now at 0.9750. AU data releases today are of 2nd tier importance. More important for the currency will be the release of Chinese PMI manufacturing data today.

Elsewhere tonight, final PMI manufacturing data for Eurozone will be released, along with unemployment data. It is expected to show a tick up to 11.0% in April.

A skittish market will end the week facing the release of the US ISM and US non-farm payrolls tonight. Market expectations are for a pick-up to 150k from 115k previously. The market is in no mood to absorb any disappointment.

All its research is available here.