By Kymberly Martin
NZD
Downward momentum in the NZD/USD resumed overnight. It slipped from early evening highs close to 0.8320 to trade at 0.8240 this morning.
After the sharp falls at the end of last week, the NZD/USD actually started the week on a fairly stable footing.
However, overnight in relatively quiet markets, it drifted lower. With the NZD/USD sitting around 0.8240 this morning, we continue to believe key support in the 0.8160-0.8200 region should hold.
Today’s domestic focus will be the release of NZ retail sales data. We’re picking a consolidation of 0.1%, following the bumper 1.5% recorded in Q4.
While our pick is should not be interpreted as a sign of weakness (indeed we see a solid trend being maintained into Q2), it is some way below published consensus (0.8%).
There is the possibility of a negative knee-jerk response from the NZD if the number does come close to our estimate.
The NZD was weaker relative to the EUR overnight, slipping to 0.6350. Key support is now eyed just below 0.6300. The dominant driver of this cross in the coming 24-hours will be Eurozone data and commentary scheduled for this evening
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Majors
It was a relatively calm night in currencies. The GBP has joined the NZD and AUD in being the weakest performers over the past 24-hours.
After recent excitement, currency markets had a more pedestrian mood overnight. Our risk appetite index (scale 1-100%) remains at a healthy 82%.
Equity markets put in flat, to marginally negative, returns.
The USD index traded a tight path between 83.10 and 83.30, showing only modest response to better-than expected US retail sales data (April advance retail sales 0.1%m/m vs. -0.3% expected).
This data confirms consumers have largely shrugged off early year tax hikes, as falling energy prices have provided a convenient offset.
The GBP/USD slipped early this morning. It was rumoured the catalyst may have been an article quoting business lobby group CBI.
It warned the BoE’s proposals to force banks to build capital buffers could result in funds being withdrawn from the economy just as things look to be picking up. The GBP/USD dipped from 1.5380, to sit around 1.5290 this morning.
The AUD/USD has continued to subside. Yesterday’s Chinese data releases (industrial production, fixed asset investment, retails sales) passed without much drama or impact on the AUD.
However, momentum has carried the AUD/USD convincingly below parity. It trades at 0.9950 this morning, its lowest level since June last year.
While the USD/JPY traded a choppy path around the 101.90 level over the past 24-hours, the sell-off in Japanese Government bonds attracted greater attention.
Today across the Tasman, focus will be on the release of the 2013/2014 Federal Budget. Our NAB colleagues believe weakness in revenue growth has likely seen a 2012/2013 deficit around $15b. This is expected to narrow to $5b in 2013/2014.
Tonight, focus will be on Europe. The German ZEW survey of economic sentiment is released, along with Eurozone industrial production data. German Chancellor Merkel is also scheduled to speak on a political platform. EU Finance Ministers are also scheduled to meet in Brussels.
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