By Kymberly Martin
NZ Dollar
The NZD has been the worst performing currency over the past 24-hours, declining 1.4% relative to the USD. The NZD/USD trades at 0.7820 this morning.
The NZD/USD dropped like a stone yesterday morning after the release of NZ Q3 CPI. The low-side reading (just 1.0%y/y) has caused the market to further reduce OCR expectations.
Overnight, the NZD/USD managed to stabilise around the 0.7860 level before drifting off to 0.7820 at present. Support is now seen at 0.7780, ahead of the September/October lows around 0.7710.
The NZD has also sharply weakened on the crosses. Notably, the NZD/AUD is trading back around 0.8930. Support is now eyed at the recent lows of 0.8860.
The one area where the NZD was able to regain its composure overnight was against the JPY. The NZD/JPY has crept off the afternoon’s lows around 84.00, to sit above 84.60 this morning, as the JPY was broadly out of favour overnight.
Today, NZ trade balance figures will be released. We believe price weakness, notably for dairy exports, will begin dominating here. That’s why we are picking a 2% fall in export values compared to a year ago. On the face of it, this is unlikely to provide much to shore up the NZD before week end. The RBNZ’s latest LVR ratio data are also due.
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Majors
The USD index inched a little higher overnight, with the JPY and NZD the main underperformers.
Market sentiment improved markedly overnight. Our global risk appetite that plunged to 32% last week is now back at 58%. The primary catalysts were PMI data. Yesterday afternoon the October HSBC China Manufacturing PMI, set the tone as it crept higher to 50.4 (50.2 expected). Above 50 marks a sector that is in expansion.
Then last evening the German Manufacturing PMI rebounded to 51.8 (49.5 expected). More broadly, the Eurozone composite PMI rose from 52.0 to 52.2, against expectations for a decline. While equities rose more than a percent on either side of the Atlantic, the JPY was the main currency casualty of the improved market sentiment.
Demand for the ‘safe haven’ JPY diminished and the USD/JPY rose from 107.20 to above 108.20 currently.
The GBP was knocked around a bit overnight as UK September retail sales data fell 0.3%m/m (0% expected). Bank of England’s Broadbent was also reported as saying any rise in official interest rates would be “limited and gradual”. The GBP/USD touched intra-night lows below 1.6000 before returning to trade around 1.6030 at present.
The release of the China PMI prompted a brief spike in the AUD/USD, but it was later in the night the currency made its highs. It poked its nose above 0.8800 early this morning before subsiding to 0.8750 currently.
Today, China Property Prices for September will be released. Tonight the focus will be on German consumer confidence, UK Q3 GDP and US new homes sales data.
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