The NZD, AUD and NOK have been the strongest performers over the past 24-hours while the EUR has declined against a fairly range-bound USD.
It was not a big night for data. However, UK and German industrial production releases provided opposing surprises.
The UK exceeded expectations while Germany disappointed. This likely contributed to diverging trends in the GBP and EUR overnight.
The EUR/USD sits a little lower this morning, at 1.1250, thought above early-morning lows.
By contrast, the GBP/USD gapped higher on the UK data release and has maintained upward momentum overnight. It trades at 1.5320 this morning, aligned with its 200-day moving average.
The JPY experienced some volatility yesterday afternoon around the release of the BoJ’s monetary policy statement. Policy was unchanged, and did not point directly at imminent easing.
The USD/JPY initially slumped, but later rebounded. It trades at 119.90 this morning.
The NOK has continued its outperformance overnight. The move has likely been assisted by recent news that Norway will withdraw cash from its $820b sovereign wealth fund, for the first time. It will be used to stimulate the economy and plug a budget gap left by declining revenues due to the plunge in global oil prices. The USD/NOK has fallen almost another 1% overnight.
The AUD has been on a steady ascent since early yesterday evening. Some stabilisation in global risk appetite and a fairly steady USD has allowed the currency to extend its post-RBA gains.
The AUD/USD trades at 0.7220 this morning. Resistance is now eyed at the mid-Sept highs of 0.7280.
However it was the NZD that took out the prize of best performer over the past 24-hours. It has gained 1.3% against the USD.
Broad stabilisation in risk appetite, combined with a less gloomy outlook for the NZ dairy sector, appears to have extended recent upward momentum.
This has likely taken the market by surprise, given recent data showed the speculative community maintained NZD ‘short’ positions, despite no longer being at extremes.
NZD/USD trades at 0.6620 this morning. Near-term resistance is now seen in the 0.6710-0.6740 window which has marked three month range highs.
Tonight, European currencies may take their cue from commentary associated with meetings of the ECB and Bank of England, though no policy change is expected from either.
The US Fed Minutes will also be released along with scheduled ‘Fed-speak’. However, we currently see the market as more inclined to respond to hard data than Fed rhetoric when forming its view on future Fed policy.
The market remains reluctant to price much probability of a Fed hike by year-end.
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Kymberly Martin is on the BNZ Research team. All its research is available here.