Markets moves were generally within tight ranges overnight, with a modestly pro-risk undercurrent. US equities are currently up smalls (+0.2%), following mostly positive closes across Europe. US bond yields have pushed a bit higher while oil prices nudge upwards. The USD is firmer.
More of President Trump’s Budget proposals have been released. The plan looks for US$3.6T spending cuts over the coming 10 years, many related to social safety nets. It also plans to sell half of the US Strategic Oil Reserve, as part of a plan to get the Budget back in balance within a decade. There has been little detail on potential tax changes. As expected, markets have been little moved. In the end it will be difficult to get through Congress; more gridlock ahead.
Germany’s Finance Minister, Wolfgang Schaeuble, said the Euro is too low for Germany – essentially reiterating recent sentiment from Chancellor Angela Merkel. At about the same, the ECB’s Coeure was suggesting no need to change guidance on negative rates suggesting that any rate hikes will we well beyond the timing of asset purchases (think late 2018). Meanwhile, there was another dose of strong data from Germany (PMIs and IFO business sentiment) and Europe as a whole (PMIs). All this caused some volatility in the EUR, with the signal currency ultimately retreating after its recent strong run higher with the central bank comments seemingly holding sway. After pushing up to a 6-month high just shy of 1.1270, EUR/USD has pulled back to sit around 1.1180 currently, to be down around 0.5%. Ears out for Draghi comments tonight.
The US dollar index is up 0.4%, partly on the back of the EUR retreat. A mild risk-on market tone also benefitted the USD, with the USD/JPY pushing up around 0.4% to around 111.80.
Market reaction to yesterday’s bombing in Manchester has been muted. GBP was not spooked, as the news broke, but has lost some ground against the stronger USD. While GBP/USD currently sits around 1.2970, down 0.3%, GBP is marginally higher against the EUR from this time yesterday.
The NZD tops the currency leaderboard for a second day running, on no particular news. It feels like catch up after underperforming over the past several weeks, although improving risk appetite and higher oil prices are helpful. The NZD/USD approached 0.7050 overnight, before easing back to opening this morning just above 0.7000 (up around 0.1%).
The NZD has positive momentum as it eyes a likely firm first milk price forecast from Fonterra for the 2017/18 season of at least $6 (possibly out today, or maybe tomorrow) and tomorrow’s Government Budget revealed a healthy set of fiscal accounts. A higher-than-market estimate (as we anticipate) for April’s NZ trade surplus in this morning’s data would only add to the positivity, although month trade data seldom causes market movement. We see initial resistance around the 0.7050 mark.
NZD/AUD has broken higher out of the circa one cent range that has prevailed since the dovish RBNZ MPS nearly two weeks ago. The push higher fell shy of 0.9400 overnight. The NZD/AUD opens today around 0.9370.
The NZ TWI has tracked circa 1.5% higher over the past two days. This is nothing to spook the RBNZ though, at around 76.0 it is simply around the level that the central bank expected through the second quarter.
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