Long USD positions continue to be unwound; NZD expected to run higher; NZD/AUD closing in on 94c again

By Jason Wong

There’s been little news over the past 24 hours but a key theme is the lower-for-longer global interest rate environment and soft USD driving up commodity prices.

Brent crude oil prices broke through the $52 per barrel mark and WTI crude broke through $51. Bloomberg’s commodity price index is up a strong 1.9%, with most components showing solid increases. 

In equity markets, while the Euro Stoxx 600 was down 0.5%, the S&P500 is currently up 0.3% and closing in on a record high.

In this context, it’s no surprise that the NZD has broken through the 0.70 mark and trades this morning up 0.5% to 0.7015, with the USD continuing to edge lower against most of the major currencies. Long USD positions continue to be unwound, based on the view of little prospect of the Fed tightening over the very near term. 

While there is technical resistance at 0.7055 for the NZD, that won’t count for much as the focus turns to the RBNZ’s MPS this morning. The Bank will have to pull a rabbit out of a hat to prevent a further push higher, although we wouldn’t be chasing the currency higher from here, following the decent bounce over the past week and a bit. 

With the recent lift in the NZ TWI to 74.6, a fresh high for the year, the Governor will no doubt be champing at the bit to talk the currency lower.

The NZD has performed better than other commodity currencies over the past 24 hours, with the AUD and CAD up only about 0.2% against the USD. NZD/AUD is closing in on 0.94 again.

GBP is at the bottom of the leaderboard, being the only major currency to fall against the USD and trading at around 1.45. 

UK industrial production surged by 2.0% m/m in April, causing only a momentary blip up in GBP, before traders refocused their attention on the upcoming referendum.

EUR/USD is back up around the 1.14 handle, while USD/JPY trades at 106.90, largely reflecting the softer USD than any fresh news.


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Daily exchange rates

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