By Kymberly Martin
NZD
The NZD/USD continues to cling on by its fingernails, sitting at 0.7870 this morning.
Once again, there was little on the domestic agenda to influence the NZD/USD yesterday, so it took its cue from general global risk sentiment.
This soured as the Bank of Japan failed to announce additional stimulus measures at its meeting yesterday. The NZD/USD briefly broke through the crucial support level at 0.7800 overnight.
However, it managed to hang on, and has returned to trade around 0.7870 this morning.
The NZD declined relative to a much stronger JPY overnight. It now sits not far off its intra-night lows, at 75.60. This is its lowest level since late February. Key support for this cross is now eyed at the 75.00 level.
While individual Bank of Japan announcements will continue to impact on near-term moves in the JPY, ultimately we expect JPY weakness to resume. Consequently, we see a higher NZD/JPY over the longer-term.
The NZD was also weaker against its European peers, though it managed to claw its way back from early morning lows.
The NZD/GBP briefly dipped below the 0.5000 level around midnight, for the first time since last September. However, it has now rebounded to sit around 0.5040 at present.
Ahead of tomorrow’s RBNZ meeting, global developments will likely remain the most significant driver of the NZD in the coming 24-hours.
Today’s NZ electronic card transactions data is unlikely to be impact on the currency. Key support for the NZD/USD continues to be eyed in the 0.7760-0.7800 window. Resistance will be encountered above 0.7900.
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Majors
The past 24-hours have been all about the JPY that has strengthened 3.1% relative to the USD.
The Bank of Japan left rates unchanged as expected yesterday, but refrained from announcing any additional measures to stimulate the economy. Governor Kuroda stopped short of extending the maturity of loans to banks, a policy which had been widely anticipated.
The lack of additional stimulus resulted in some pull-back in broad global risk appetite. Our risk appetite index (scale 0-100%) declined from 65% to 61%.
Equity markets declined 1-2% in Europe, while the S&P500 is currently down 0.90%.
The JPY maintained upward momentum over the course of the day and overnight. The USD/JPY has fallen from 99.00 to sit around 95.90 currently. The ‘safe haven’ CHF was also a beneficiary of increased risk aversion.
The USD/CHF fell from 0.9340 to sit around 0.9260 this morning. This extends its falls since mid-May from close to 0.9800.
As a consequence of USD/JPY selling the broad USD index also declined. From 81.70 it now sits around 81.10 this morning, a level that has marked its lows over the past few days.
European currencies were generally a little stronger relative to the USD. The GBP weathered the release of UK data for April that showed manufacturing production declined 0.2% in the month.
Given the upward revision to the April PMI Manufacturing survey to above the 50 breakeven level, the 0.2% fall on the month was a little disappointing. However, it did follow two months of strong gains when manufacturing output grew by 0.7% and 1.1% respectively.
As such, the underlying momentum in the series is likely still intact. The GBP/USD has climbed from intra-night lows around 1.5520 to around 1.5630 currently.
The AUD continues to desperately fight for its life. Falling as low as 0.9330 overnight, it has returned to trade at 0.9420 currently.
We continue to caution that although AU fundamentals no longer look so rosy, speculative AUD short positions are now at historic extremes.
This suggests a bounce may be in the offing. Today the AU Westpac consumer confidence index will be released.
Today the Bank of Japan will release its monthly economic report for June. Tonight UK employment data will be released along with Eurozone Industrial production and US MBA mortgage applications data.
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