By Kymberly Martin
‘Oil-linked’ currencies have outperformed overnight as global oil prices have rebounded. The JPY is weaker. After a tumultuous 24-hours, the NZD/USD trades at a similar level to this time yesterday morning.
Overnight, market sentiment was fairly buoyant. Equity markets posted gains on either side of the Atlantic and the WTI oil price enjoyed more than a 4.5% bounce. This was aided by headlines attributed to Saudi’s energy minister suggesting oil producers could take actions to stabilise the market at a meeting next month. This helped boost the ‘oil-linked’ CAD and NOK.
The JPY has been the weakest performing currency this morning. From 101.20 the USD/JPY now sits at 102.00. More broadly the USD index has traded a range overnight, sitting close to intra-night highs at present.
The NZD bolted higher against all of its peers on the RBNZ’s announcement yesterday morning. This was despite the Bank delivering a 25bps OCR cut. This was aligned with our fear that the market may read the Bank’s accompanying commentary as insufficiently dovish, given it was already pricing around 65bps of total rate cuts. But after the knee-jerk response the NZD/USD consolidated and drifted lower overnight. It now trades at a similar level to where it was prior to the RBNZ’s announcement. The same goes for the NZ TWI.
Over the medium-term we still expect the NZD/USD will trade lower. But this will likely depend on relative economic fundamentals, global risk appetite and evolving expectations for the US Fed, rather than future actions of the RBNZ.
For today’s release of NZ Q2 retail sales data, we expect a 1.1% q/q gain to confirm the idea of solid spending growth.
Today’s BNZ PMI would also send a message of solidity if it comes in anywhere close to its June reading of 57.7. Neither is likely to provide a negative swipe to the NZD.
More broadly, market sentiment may be influenced by the release of China data this afternoon and US retail sales data tonight.
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