The USD fell sharply after the release of US labour market data, allowing the NZD/USD to regain some composure.
Overnight, the ‘G’ word was hardly mentioned, and all attention turned to the release of US payrolls data.
The headline payrolls number was not far from expectation, and the US unemployment rate actually fell more than expected.
However, the market appears to have focused on the average hourly earnings number that declined to 2.0%y/y from 2.3% previously. This will allow the US Fed some breathing space, but does not necessarily preclude a September rate hike. However, the USD fell fairly sharply against all its peers, before consolidating in the early hours of this morning.
The EUR/USD initially over-shot in response to the data, briefly spiking above 1.1120. However, trading soon became more orderly and the common currency settled to trade around 1.1090.
The GBP/USD experienced some choppy trading overnight. After the previous night’s disappointing UK manufacturing PMI, the GBP/USD enjoyed an early evening bounce after the release of a stronger-than-expected UK construction PMI. It also gapped higher after the US data release. Overall however, it trades at similar levels to yesterday morning, around 1.5600.
The AUD and NZD both enjoyed a decent rebound after the US payrolls release early this morning. The NZD/USD initially sank toward 0.6660 early this morning, having been on the back-foot most of yesterday following the weak GDT dairy auction, However the NZD/USD gapped higher as the US data was released, and has subsequently traded up to 0.6720.
The NZD remains technically weak. Momentum is negative and there is little solid support ahead of the mid-2010 lows around 0.6580. For a decent rebound in the NZD/USD to sustain would likely require the market to once again seriously question the prospect of US Fed hikes this year. However, we are also mindful that current speculative positioning is still tilted toward NZ shorts. Any bounce could therefore result in a wave of short-covering, exacerbating the move.
Overnight, the NZD/AUD has also recovered its losses from yesterday. Having touched 0.8750 early last evening the cross now trades back at 0.8820. In the absence of domestic data releases today, the release of AU retail sales data may be the key influence on the cross today.
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