Standard central banker speak: talk down your currency. Markets eye RBNZ's view on NZD this week

by Kimberly Martin

NZ Dollar

The NZD has maintained a fairly tight range over the past 24-hours, sitting just below 0.8470 currently.

The NZD/USD has traded without much of a heart-beat in the absence of key data releases domestically or offshore.

Unease continues to surround the situation in the Crimea but is not dramatically impacting on risk appetite at present. The NZD/USD traded between 0.8440 and 0.8480 over the past 24-hours sitting just below 0.8470 this morning.

Trading on most crosses has also been unremarkable. However the NZD strengthened against a weak GBP overnight.

The Bank of England’s Bean was the latest in a long line of global central Bank officials to talk down their currency.

In this regard it will be interesting to see what the RBNZ has in store for the NZD at this Thursday’s meeting. In recent RBNZ commentary we have noted a greater acceptance of NZD strength as representing NZ economic strength, as opposed to merely being a casualty of ultra-loose monetary policy elsewhere.

The NZD/AUD also pushed higher overnight to trade around 0.9390 currently. Late February highs around 0.9410 provide the next level of near-term resistance. The key driver of the cross today will likely be the release of the NAB business survey (1.30pmNZT). A strong result would likely take a toll on the NZD/AUD.

Today, NZ crown accounts and electronic card transactions will be released.

Key NZD/USD resistance remains at 0.8520. Support is eyed between 0.8420 and 0.8440.

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Majors

It was a relatively quiet night in currency markets. The AUD and GBP were the key underperformers.

The situation in the Ukraine remains tense, although no longer dominating headlines. A quote overnight that Russian troops had opened fire during the takeover of a Ukrainian military post in the Crimea did nothing to improve market sentiment. In the absence of key data releases, equities on both sides of the Atlantic provided modest negative returns. However, our global risk appetite index remains at a fairly steady 65%.

In this backdrop there was no obvious direction for currency markets. The USD index crept a little higher to sit just below 79.80 this morning.

The GBP was on a downward trajectory from the early evening. The move was later assisted by comments from Bank of England’s Bean. He said that further appreciation of the pound would not be helpful for exports. From around 1.6740 last evening the GBP/USD sits around 1.6640 currently.

The JPY escaped relatively unscathed from the delivery of Japanese balance of payments data yesterday. Japan’s unadjusted current account came in at –¥1589B vs. ¥1411.8B expected. This is a new record deficit. Meanwhile Q4 GDP was unrevised at 0.2%q/q. However, the USD/JPY has bobbed around the 103.20 level for much of the past 24-hours.

The AUD was the weakest performing currency over the past 24-hours. From intra-night highs approaching 0.9060 it now sits just above 0.9010. The key for the AUD today will be the release of the NAB business survey. The main focus will be on whether conditions and confidence can improve further. In January, business conditions consolidated the strong pick up in December, reaching an almost 3 year high of +4. A strong reading would help support the AUD.

Elsewhere, the Bank of Japan meets today but no changes are expected to be announced.

Tonight, the Bank of England’s Governor Carney is scheduled to give testimony to Parliament. The NIESR’s February estimate of UK GDP is also scheduled for release. There is once again a lack of US data releases.

Other news:

* German IP grew 0.8% in January (0.8% exp.), and the previous month was revised up to 0.1% (-0.6% prev.)

All its research is available here.