By Kymberly Martin
The NZD/USD has been amongst the strongest performers over the past 24-hours. The GBP has continued to underperform.
The USD was on a steady downward path versus a stronger EUR last evening. However, it managed a modest rebound in the early hours of this morning, following a stronger than expected US ISM release. The EUR/USD has gained more than 0.5%, trading at 1.1180 currently.
The GBP continued to drift lower overnight. After recent polls, the threat of ‘Brexit’ once again hangs over the currency. A slightly better than expected UK manufacturing PMI release last evening was not sufficient to improve sentiment toward the GBP/USD. It trades this morning at 1.4410.
The JPY has been the strongest performing currency over the past 24-hours. Yesterday, in a significant U-turn, Japanese Prime Minister Abe announced he would delay the proposed sales tax increase until 2019. He added that further bold economic measures would follow in the autumn (though yet to be detailed). The USD/JPY sits 1.1% below yesterday afternoon’s level, at 109.50.
The AUD gapped higher yesterday afternoon, after the release of AU Q1 GDP beat consensus expectation. The detail showed that net exports and household consumption made a strong contribution, offsetting sharp declines in mining investment.
Our NAB colleagues believe the RBA is likely to look through the strong Q1 GDP result given it was largely due to a lift in exports that is not expected to be sustained. Additionally, the subdued Q1 CPI figure means the RBA will also be focused on details including wages, unit labour costs, and the consumer price deflator, which were subdued. At this stage, NAB expects the RBA to remain on hold for the remainder of 2016. They acknowledge a further rate cut remains a possibility if inflation continues to surprise to the low side.
The AUD/USD failed to break above 0.7300, despite its bounce higher yesterday afternoon. It has subsequently eased to trade at 0.7260.
Progression for the NZD/USD has been steadier. It has traded a fairly pedestrian path higher since yesterday morning. A modest further rise in average dairy prices at this morning’s GDT auction kept the ascending path intact. The NZD/USD now trades at 0.6820.
The NZD/AUD cross fell like a stone after the AU GDP release. However, it soon fought its way back. From early afternoon lows below 0.9320 it now trades above yesterday morning’s level, at 0.9400. This is close to the top of its trading pattern since mid-February. Today there are no domestic data releases scheduled, so it may fall to AU data (trade balance and retail sales) to influence trading on the cross.
Tonight the release of the US ADP employment report will likely be used to gauge risks around Friday’s US payrolls report. This will ultimately influence USD direction into weekend.
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