A broad improvement in market sentiment overnight and rebound in commodities helped the AUD and NZD outperform. The JPY and CHF were the weakest performers over the past 24-hours.
A rebound in the Chinese equity market and rebound in key commodity prices helped lift the mood in markets generally. Our global risk appetite index (0-100%) has inched its way up to 28% from lows of 16% in late Aug. The broad CRB global commodity index has risen 0.8%. Brent crude oil is up 4%. European and US equities took their cue from Asian markets, with the S&P500 currently up 1.9%.
In this backdrop, the ‘commodity-linked’ AUD, NZD, NOK and CAD were the strongest performers. The AUD/USD also received a bit of a boost from the pick-up shown in AU business conditions in yesterday’s NAB survey. Our NAB colleagues read the survey as saying the non-mining economy is picking up steam (especially in the non-mining services). Encouragingly, capacity utilisation also bounced back. In their view, these numbers do not suggest the economy needs any further easing to stimulate demand.
The AUD/USD experienced a few wobbles around the release of China trade data yesterday afternoon that showed trade growth remained subdued. A bigger than expected trade surplus was likely assisted by falling commodity prices that have reduced import values. However, later in the evening, Chinese equity markets rebounded from recent lows, helping cement an improvement in general risk appetite. The AUD/USD has traded up from 0.6940 to 0.7030, likely assisted by short covering.
The NZD/USD showed a similar trend overnight. From around 0.6260 yesterday afternoon it has traded up to 9.6340 currently. Near-term resistance is eyed just above 0.6400, while support is likely to be felt on any pull-back toward 0.6250.
By contrast, improved sentiment resulted in the ‘safe-haven’ JPY and CHF being shunned. They both sit about 0.6% lower against the USD this morning. The USD/JPY trades at 120.00.
The GBP continued its march higher ahead of Thursday’s Bank of England meeting. From 1.5280 yesterday afternoon it now trades at 1.5380.
This morning there is a speech by the US Fed’s Kocherlakota to look out for, while later on there are two RBA members, Lowe and Debelle, scheduled to speak. Tonight the Bank of Canada will meet to announce rates although no change is expected.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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