By Kymberly Martin
NZD
The NZD/USD continued to slide overnight. It sits at 0.8190 this morning.
Yesterday’s NZ retail sales data were nothing for the currency to get excited about. Real sales for Q1 (0.5%) were slightly below consensus, but remained remarkably solid given the very strong readings recorded in the previous quarter.
In addition, we think Q2 is shaping up to be at least as strong as Q1. The NZD held up well during the day, but came under selling pressure again overnight.
In collusion with its counterpart across the Tasman the NZD slipped from overnight highs close to 0.8300, to sit around 0.8190 currently. Crucial support is now seen at the 0.8160 level.
The NZD was also weaker relative to key European peers overnight. The NZD/GBP slid to sit around 0.5380 this morning.
The NZD/EUR was on a steady downward path to sit at 0.6330 this morning, its lowest level since mid-March.
Domestically, there are no data releases ahead of tomorrow’s key events for the week.
The highlights will be the release of the NZ Government Budget, and the April BNZ PMI.
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Majors
The stronger USD theme continued overnight. The AUD and NZD were amongst the weakest performers.
In the backdrop of fairly buoyant equity markets and a continued rise in US long bond yields (now at the highest level since mid-March), the USD index continued to strengthen.
The USD index, at 83.60, is now at its highest level since July last year. At that time the USD index topped out at 84.00.
The EUR was a little softer overnight. European data releases were somewhat mixed. Eurozone March industrial production was stronger than expected (1.0%m/m vs. 0.5% expected).
The German ZEW survey held up in May, but was below consensus expectations. The EUR/USD slipped from 1.3020 to sit at 1.2940 this morning.
Weakness in the AUD continued yesterday. Yesterday’s Australian Budget release confirmed that the Government’s progress toward surplus would be slower than previously indicated.
While rating agencies quickly confirmed the sovereign’s AAA rating, we see it as at the weaker end of the (few) remaining AAA rated countries. The AUD/USD fell from around 0.9980 to sit at 0.9880 this morning.
The recent reversal in the GBP/USD continued overnight as it slipped further to 1.5220. The late April, post-Q1-GDP data rebound in the GBP has now been eliminated.
There is plenty on the UK agenda tonight, with the release of labour data, including the unemployment rate (consensus expects this to remain at 7.9%).
The Bank of England also publishes its quarterly inflation report. This is seen by some as the final hurdle before the Bank of England implements further quantitative easing.
Tonight, the Eurozone publishes Q1 GDP. The US will publish the Empire Manufacturing survey, industrial production data and the NAHB housing survey.
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