Another quiet evening for currency markets, albeit one where EUR sunk to fresh six-month lows. Equities are flat to weaker. NZD continues to hover above but near 0.65.
EUR/USD is 0.6% weaker at 1.0690 this morning, the biggest loser amongst G10 currencies, and breaking through the 1.0710 post-payrolls low.
Some heaving selling against the crosses, particularly EUR/GBP, was responsible. The clearly divergent paths of ECB and Fed, with both expected to deliver policy action in December, has investors selling EUR on any rallies.
As an aside, the fall of Portugal’s centre-right government this morning will no doubt grab headlines, but at this stage should not significantly affect wider markets. Narrowly elected into minority government just over a month ago, it was brought down by a loose alliance of left-leaning opposition parties. Portuguese bonds have sold off, amid signs that a Socialist-led government will loosen the fiscal purse strings.
Asian equities closed mostly in the red yesterday, influenced by soft Chinese inflation data. The October CPI print undershot expectations, albeit mostly driven by the volatility food component. Investors will be closely watching today’s retail sales, industrial production, and fixed asset investment data out of China. These will likely be the major cue for risk assets in Asia, and heading into the European session. A very soft reading could well see NZD break below 0.65.
NZD/USD remains wedged between the 50-day and 100-day moving averages (0.6530 and 0.6574 respectively), defying a close below the former since Friday. But that range is narrowing, and we anticipate the wider 0.6500 – 0.6610 range will be broken to the downside in the near-term.
The RBNZ’s Financial Stability Report (due today) may provide some cues via stray headlines, both from the press conference at 9am as well as Governor Wheelers testimony to Parliament’s FEC at 1pm.
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Raiko Shareef is on the BNZ Research team. All its research is available here.