by Kymberly Martin
NZ Dollar
The NZD/USD sits a little lower, around 0.8280 this morning.
The NZD/USD, unusually, showed a response to yesterday’s NZ PPI data. The upward momentum in the data was quite surprising, as Q3 PPI rose 2.4%, to take the annual rise to 4.1%.
However, the push higher in the NZD/USD proved short-lived. After a failed attempt to push through 0.8400, it drifted lower overnight as the USD strengthened.
The NZD/AUD also continued to subside, drifting down to sit around 0.8840 this morning. NZ data delivery today is of 2nd tier importance (ANZ job advertisements, credit card billings).
We therefore anticipate the cross will take direction from the HSBC China flash PMI release (a positive reading being supportive of the AUD), and the RBA Governor’s speech tonight (see Majors). It is no secret the RBA considers the AUD to be “over-valued”.
The NZD slid relative to the GBP and JPY overnight, and sits a little lower relative to the EUR after some pronounced intra-night volatility. Suggestions the ECB may consider negative interest rates appeared to cause some turbulence in EUR trading overnight. The NZD/EUR sits around 0.6160 this morning.
After trading a fairly steady downward path from 0.5200 to 0.5130 this morning, the NZD/GBP is once again approaching key support levels. A band of support is seen in the 0.5080-0.5110 window.
For today, NZD/USD support is seen approaching 0.8220. Resistance is eyed at 0.8350.
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Majors
The USD index strengthened as the EUR fell early this morning. The AUD has underperformed along with the NZD over the past 24-hours.
The USD was spurred higher as the EUR fell, as the market speculated on diverging monetary policy paths ahead. Headlines this morning suggested the ECB may consider a negative deposit rate if more easing is needed. Meanwhile, Fed member Bullard was cited as saying tapering was “on the table” for the next meeting.
The EUR/USD dropped sharply from above 1.3540 to sit at 1.3440 at present. The USD index gapped from below 80.60 to sit above 81.00 currently.
Meanwhile, equity markets were relatively calm with the Euro Stoxx 50 closing virtually flat and the S&P500 currently up 0.20%.
The GBP/USD showed a bit of volatility around the release of the Bank of England’s most recent minutes. The minutes showed the MPC unanimous in its vote to keep rates and asset purchases unchanged. The minutes showed the BoE thought record-low borrowing costs may still be needed even after the jobless rate falls to 7%. An initial fall in the GBP/USD proved short-lived however. It has crawled up to sit around 1.6140 this morning.
The USD/JPY continues to flirt with the 100.00 level, sitting just above this level at present. The Bank of Japan will announce its target rate today. Consensus does not expect the BoJ to announce any changes to its monetary base targets at this meeting.
The AUD/USD has drifted lower over the past 24-hours. The AUD will be in the spotlight as the RBA announces its October FX transactions today and Governor Stevens speaks this evening. This speech is entitled “The Australian Dollar: Thirty Years of Floating”. It may provide more exploration of the reasons for the AUD’s current “over-valuation” and the outlook for the AU terms of trade. For now, key support for the AUD/USD remains at 0.9280.
Today’s focus locally will be on the release of the HSBC China flash PMI for November. Consensus expects it to cling on above 50 (the level of expansion). This will be important for general sentiment and for the NZD and AUD in particular.
Tonight, Eurozone PMI data for November will be delivered and ECB President Draghi is scheduled to speak in Berlin. In the US, the Philadelphia Fed business survey will be released.
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