By Kymberly Martin
NZD
It was a relatively quiet 24-hours of consolidation for the NZD/USD. Having found resistance at 0.8280 early this morning the currency now sits just above 0.8220.
There was little to directly impact on the NZD, as markets remain a little directionless. Included in our flows was some light but steady demand from investor names for NZD (and other FX).
This buying ensured the NZD traded on an 82cent handle, and also recovered ground on cross rates.
The NZD/AUD was on a fairly steady upward path overnight, moving from 0.7890 to around 0.7920.
As NZ-AU interest rate differentials have become less negative in recent weeks this has supported the uptrend in the cross. Improving interest rate differentials are a key component of our constructive view on the NZD/AUD over the medium-term. Our end of year target is 0.8200.
The NZD also made small gains relative to its key European peers. The NZD/GBP and NZD/EUR sit at 0.5080 and 0.6370 respectively.
NZ trade balance data will be released today. We’re expecting some payback in August’s exports, following their unusually strong result over June/July. This, along with steady imports, is expected to generate a monthly deficit of around $730m. This would be enough to keep the annual deficit expanding. Though unlikely to prompt significant market reaction today, a deteriorating trend in NZ’s trade balance is worth keeping an eye on.
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Majors
There was a lack of momentum in markets over the past 24-hours. Most currencies retained fairly tight ranges with the USD index back just above 79.50.
Our risk appetite index (scale 0-100%) slipped fractionally to 75%, though European equities posted modest gains. The S&P500 ran out of steam early this morning and is now down around 0.70%.
There is little clear direction in currency markets at present, as the market awaits key data releases or renewed European headlines. In the general vacuum, comments from the Federal Reserve’s Plosser caught attention.
Overnight, Italy and Spain managed to auction debt without too much drama. The Spanish Deputy PM was reported as wanting to know the extent to which the ECB will intervene in the secondary bond market before deciding whether to officially apply for assistance. The EUR/USD traded above 1.2960 early this morning but is now back at 1.2910.
The recent uptrend in the GBP/USD appears to be petering out. It is struggling to break above the highs reached in late April, now consolidating around the 1.6200 level.
Today, UK CBI retail figures will be released ahead of tomorrow’s final reading of Q2 GDP (-0.5% expected).
It is another relatively light day ahead on the data front. Tonight, US mortgage applications and new home sales data will be released. These are the latest indicator of how the recovery in the US housing sector is progressing.
Event Calendar:
26 September: NZ Trade balance; US MBA mortgage applications; US home sales 27 September: NBNZ business confidence; UK GDP; EC confidence indicators; US GDP; US initial jobless claims 28 September: NZ Building permits; NZ credit aggregates; AU private sector credit; CH, HSBC manufacturing PMI, US Chicago PMI; US University of Michigan confidence.
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