By Kymberly Martin
NZ Dollar
The NZD/USD sits a little lower, at 0.7950 this morning.
There was little in the way of domestic developments to drive the NZD yesterday. It was briefly tosses around by the release of AU CPI yesterday afternoon, but with no lasting impact.
The NZD/USD stuck its nose up toward 0.7990 overnight, but didn’t sustain the move. It then subsided early this morning in the backdrop of broadly stronger USD.
Crucial for the NZD/USD today will be the release of NZ Q3 CPI (10.45am NZT). We, along with consensus expect CPI to dip to 1.2%q/q, but see the risks tilted to the downside.
A low-side reading would likely weigh on the NZD/USD. NZD/USD support is seen, approaching 0.7900. Resistance will be encountered on any probes above 0.8000.
On the crosses, the NZD/EUR sits a little higher, at 0.6280 this morning. Meanwhile the NZD/GBP, that shot higher after the release of Bank of England Minutes last evening, has subsequently returned to trade below 0.4950.
The NZD/AUD sits a little lower this morning, at 0.9040.
Key for the cross today, following the NZ CPI release, will be the release of the HSBC China Manufacturing PMI. If this manages to keep its nose above 50, as expected, this may support the AUD relative the NZD.
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Majors
The USD strengthened against most of its peers overnight, with European currencies underperforming.
Moves across most asset classes were undramatic overnight, in contrast to activity of the past couple of weeks. Equities made modest gains in Europe while the S&P500 is currently down 0.4%. The Q3 earnings reporting season continues to unfold. With 136/500 companies now reported the positive earnings surprise stands at 4.66%.
Overnight, US September core CPI came in line with expectations at 0.1%m/m (1.7% y/y). Current inflation poses no immediate threat to the Fed’s ultra-loose monetary policy. However, the market (prompted by the Fed) will likely remain fixated on wage pressures as the key inflationary variable to watch that may encourage policy tightening. The USD index was broadly stronger on the night, sitting above 89.60 this morning.
There were some stark moves in the CAD overnight. Early this morning the currency plunged on weak Canadian August retail sales data (-0.3% vs. 0.0% expected). Soon after, the Bank of Canada left the cash rate at 1.00%, as expected. While abandoning forward guidance it said financial stability risks associated with household imbalances were “edging higher”. It also said activity was more robust than it had anticipated. The CAD strengthened. The USD/CAD now sits at 1.1220, having traded a 1.1190-1.1290 range this morning.
The AUD/USD experienced some volatility on the release of AU CPI data yesterday, without the data providing any real direction for the currency. The AUD/USD gained some upward momentum overnight, touching above 0.8810, but has returned to trade at 0.8790 currently. The focus for the AUD today will be the release of the October HSBC China Manufacturing PMI.
Meanwhile, the GBP/USD fell quite sharply on the release of Bank of England Minutes last night. From early evening highs around 1.6130, the GBP/USD touched below 1.6020 after the Minutes, before returning to trade at 1.6060 at present.
Tonight, Eurozone and US Manufacturing PMI data will be released. UK retail sales data is also due.
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