By Kymberly Martin
NZD
It was a relatively subdued 24-hours for the NZD. It tracked quietly lower to sit around 0.8090 currently.
Yesterday’s NZ manufacturing data was somewhat soggy. Taking this into consideration, with other recent data points, we now expect next Thursday’s release of Q2 GDP to print slightly negative.
We are formally picking a 0.1% decline for the quarter. If we are right, the release itself would likely elicit a negative knee-jerk reaction from the NZD.
However, we think this may be an over-reaction given (i) this data would still suggest a 1.0% expansion in H1. (ii) general economic indicators are still suggestive of growth going forward and we thus continue to expect a 0.7% expansion in Q3.
Today, NZ electronic card transactions and QVNZ house price data will be released. We expect tonight the currency will also take its cue from global risk appetite determined by European headlines. We continue to see upside resistance for the NZD/USD at 0.8145. Support is eyed around 0.8070.
The NZD/AUD consolidated its recent gains overnight above the 0.7820 level, finding resistance above 0.7840.
The key data for the cross today will be this afternoon’s release of the NAB business confidence survey (13.30 NZT). Stabilisation after the declining trend of recent months would likely be welcomed by markets. For now, NZD/AUD resistance is seen just below 0.7850 and support is seen at 0.7800.
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Majors
After the hefty moves seen on Friday, currency markets have started the week with little pulse. The USD index sits just above 80.30.
Markets appear to be in ‘wait and see’ mode ahead of Thursday night’s US FOMC and tomorrow’s vote by the German Constitutional Court on the legality of the ESM.
Approval is widely expected, though a lack of approval is the wildcard that would throw markets into turbulence. For now, markets have been fairly stable. Our risk appetite index (scale 0-100%) remains at a very healthy 73%. Equity markets have given up less than 0.5% of their recent strong gains.
The EUR/USD has given back just a little of its recent rise, slipping from 1.2810 to 1.2760 presently. There is little in the way of Eurozone data releases tonight, so the market will focus on headline watching ahead of Wednesday’s German vote, and Dutch elections.
The AUD opened the week only slightly softer after the surge higher at the end of last week, taking in its stride the weekend’s Chinese data releases.
The AUD/USD sits around 1.0240. The market continues to price almost 100bps of rate cuts from the RBA in the year ahead.
Next Tuesday’s release of September RBA board minutes may add some colour on current RBA thinking.
Today, the NAB survey of business conditions will be released (13.30 NZT). The trend in this series over the past 3 months has been soft and equivalent to an annualised GDP growth rate of just 2.5%. A bounce would be welcomed.
It is another relatively light night of data ahead. US trade data will be released but will unlikely garner too much attention from a market focused on Thursday night’s FOMC meeting.
Event Calendar:
11 September: NZ electronic card transactions; NZ QVNZ house prices; AU NAB business confidence; US trade balance; 12 September: AU dwelling starts; UK employment; EU IP; EU elections in Netherlands, EU German constitutional court rules on legality of ESM; 13 September: NZ RBNZ policy statement; NZ PMI; AU RBA Bulletin; EU SNB meetgs; US PPIs; US jobless claims; US FOMC meet; G20 begins; 14 September: Eurogroup meeting; US CPI; US retail sales; US Michigan consumer confidence.
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