by Kymberly Martin
NZ Dollar
The NZD/USD sits a little higher, at 0.8360, this morning.
Yesterday’s NZ Performance of Services Index for October moved up to 52.8, a 1.8 point rise from September.
The result, similar to last week’s PMI, gives further indications that GDP growth is picking up to an above-trend pace.
The NZD/USD crept higher early in last evening, attempting a break of the key resistance level just above 0.8400. However this failed and the NZD/USD drifted lower over the course of the early morning to sit around 0.8360 currently.
The NZD/AUD failed to push through the window of resistance at 0.8910-0.8930 overnight, sitting just above 0.8900 this morning. Today, the RBA issues its November minutes although these may pass without much fanfare.
The domestic agenda is fairly bare today, although the latest global dairy auction is scheduled for early tomorrow morning (NZT). We wouldn’t be surprised to see further slippage in prices, though remembering prices remain at elevated levels. We see nothing to threaten the sky-high dairy payout forecast for the coming season.
For today, we see NZD/USD support at 0.8330. Key resistance remains at 0.8410. If broadly positive risk sentiment holds, a further assault on this key level will likely be attempted before the end of the week.
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Majors
USD weakness remained the key theme overnight. The AUD and NZD outperformed. The GBP underperformed.
There was little in the way of crucial data releases overnight, to provide direction for currencies. Rather, the broader theme that incoming US Fed Chair, Yellen is likely to keep policy looser for longer pervaded markets.
Equity markets provided further solid returns in Europe (Euro Stoxx 50, 0.90%, FTSE 100, 0.45%) but the S&P500 is finding resistance to pushing above the 1800 level.
Our risk appetite index (scale 0-100%) remains at a fairly hearty 70%. Oil and gold prices continue to slip along with a slight decline in the CRB global commodities index. More broadly, the commodities index has been consolidating since the start of the month after previous steep falls.
As US bond yields subsided, the USD index drifted lower, from around 80.90 last evening, to as low as 80.60 early this morning.
Data yesterday, showed a slightly larger than expected Eurozone trade surplus. The seasonally adjusted trade surplus widened from €12.3b to €14.3b in September. This remains fairly elevated by historic standards.
Rather than reflecting a strong pick-up in export growth it likely represents weak domestic demand for imports. However, the EUR/USD was a beneficiary of general USD weakness overnight, extending its recent rebound.
Touching as high as 1.3540 last night it has returned to sit at 1.3500 currently.
The GBP/USD failed to make further headway overnight. It found resistance approaching the 1.6150 level before slumping to sit around 1.6080 at present.
The AUD/USD was on the ascendancy from early yesterday evening. It climbed above 0.9410 before pulling back to sit around 0.9390 this morning.
Today the RBA releases its board minutes, although the market may be saving its scrutiny for the Governor’s speech on Thursday evening, entitled “The Australian Dollar: Thirty Years of Floating”. The speech may provide more exploration of the reasons for the AUD’s current “over-valuation” and the outlook for the AU terms of trade.
Tonight, the German ZEW survey of the economy will be released along with the OECD’s November Economic Outlook. It’s once again fairly light on the US data front with only the employment cost index scheduled for release. The Fed’s Evans will be the latest in a line of Fed members scheduled to speak to this week.
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