By Kymberly Martin
Most currencies have traded reasonably tight ranges over the past 24-hours. After a burst of volatility yesterday afternoon, the NZD/USD now trades at 0.7120.
The USD has traded a little higher overnight, but overall its range was fairly limited compared to recent days’ moves. Equally, the range in the EUR/USD has been contained. The EUR/USD now trades at 1.0730.
However, the EUR/USD experienced an abrupt step lower in the early hours of this morning, which was accredited to comments from German PM Merkel. She was quoted as saying that the region could not afford a “second Euro crisis” and that Euro members must abide by stability pact rules. This was hardly a revelation, but enough to knock the EUR/USD a little lower. Merkel was also re-elected by her CDU party as leader to stand for election a fourth time.
The AUD/USD has consolidated overnight, after trading lower yesterday afternoon. It took a step lower as the release of net export and Government spending data suggested downside risk to today’s Q3 GDP release (see Interest Rates). Ahead of this, the AUD/USD now trades at 0.7460.
The NZD/USD experienced a short spell of volatility late yesterday afternoon, without an obvious catalyst. It soon regained its composure and has subsequently drifted a little lower over the early hours of this morning. The latest GDT auction, early this morning, provided no significant surprise. Average prices rose 3.5% from the previous event. Fundamentals suggest the risks are tilted toward near term price gains, but potential for some consolidation during 2017. The NZD/USD currently trades at 0.7110.
The NZD/AUD has declined from afternoon highs near 0.9600 to now trade at 0.9540. The 0.9600 level has remained a firm line of resistance since early-November. Our medium-term view remains for the cross to trade a range around the mid-90s in the months ahead. Today, the cross may be influenced by the release of AU Q3 GDP. A low-side reading could see the NZD/AUD re-test the 0.9600 level. Also look out for comments from RBNZ’s Wheeler later this morning, as he addresses the Select Committee.
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