You could draw a horizontal line through trading in most currencies overnight, as the US celebrated Thanksgiving. Over the past 24-hours the AUD has been the weakest performer.
Unsurprisingly, there was not too much action overnight as US markets remained closed and there was a dearth of data releases or news flow. However, the Euro Stoxx 50 managed a 1% rebound, whilst the WTI price fell1.5%.
A sharp shift lower in the AUD occurred yesterday afternoon on the release of a soft AU Q3 private capital expenditure report. The results showed mining investment was weak, as expected (-10.4%q/q). However, more disappointing was the lack of any sign of recovery in non-mining investment.
Our NAB colleagues believe these results are unlikely to fundamentally change the RBA’s view on the economy. The broad story remains of mining investment continuing to unwind, while the non-mining economy has started to pick-up, witnessed by the improvement in the labour market and above average business conditions. A pick-up in non-mining investment remains the elusive piece of the puzzle. The RBA is still likely to hold onto its faith that non-mining investment will begin to pick-up in 2016/17, though remaining subdued over the coming year.
Our NAB colleagues still view a low probability of a further RBA cut. The market now prices around 20 bps of cuts within the year ahead. The AUD/USD gapped from 0.7260 to 0.7220 directly after the data release, but has subsequently recovered to 0.7240.
The NZD/AUD gained a boost on the AU data. From below 0.9060, the cross soon found itself above 0.9100. But it was unable to hold onto further gains overnight and has slipped to 0.9080 currently.
Meanwhile the NZD/USD has traded a fairly unexciting path over the past 24-hours. It made a brief push toward 0.6600 last evening but has returned to trade at 0.6570 currently. There is little scheduled, to drive the market out of its lethargy as we move into weekend. A potential driver of the GBP tonight may be the release of Q3 UK GDP data. Ahead of this, the GBP/USD trades near the lower end of its range of the past few months, at 1.5110.
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Kymberly Martin is on the BNZ Research team. All its research is available here.