Global oil prices rising. IMF cuts global growth forecast. NZD gets a boost from GDT auction, may go even higher

By Kymberly Martin

The USD was weaker against all its major peers overnight. The strongest performer over the past 24-hours has been the NOK, likely assisted by a strong rebound in oil prices.

The USD was on the back-foot from the start of the evening. Specific data did not appear to be the catalyst.

Downward momentum appeared to increase following comments from the IMF. The Fund cut its global growth forecasts for this year from 3.3% to 3.1%, and for next from 3.8% to 3.6%. It reiterated that it believes the US Fed should await firmer inflation signals before raising rates. This rhymes with current market pricing which now sees minimal prospect of a Fed rate hike this year.

Overall the USD index has lost about 0.6% since last evening. The EUR/USD has pushed up from 1.1180 to trade at 1.1260 at present.

However, the strongest performer over the past 24-hours has been the NOK which has gained 1.25% against the USD. The move was likely helped by a further rebound in global oil prices. The WTI oil price is up over 4.0%, now more than 25% above its late-Aug lows.

The AUD gained a boost yesterday afternoon following the RBA’s meeting. There was little surprise in the Bank’s decision to leave its cash rate unchanged, but it also sounded relatively sanguine about the outlook. The Bank described the AUD as “adjusting to the significant decline in commodity prices”. From 0.7080 pre-meeting the AUD/USD now trades at 0.7150, the rise also assisted by the broadly weaker USD overnight.

The NZD/USD also made gains, however its move higher did not occur until after the latest GDT dairy auction in the early hours of this morning. As we had anticipated the auction showed a further solid gain (9.9% in average prices), from the previous event. This takes the rebound in prices since mid-Aug to well over 50%, though we caution that near-term pressures on the dairy sector are still acute. The NZD/USD has rebounded from intra-night lows around 0.6480 to trade at 0.6540 this morning.

Technically, a break above 0.6560 would open the way for a near-term push back above 0.6700.


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Daily exchange rates

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Kymberly Martin is on the BNZ Research team. All its research is available here.