The trading week has got off to a sleepy start, with no major economic releases and Trump out of the spotlight. That’ll soon change with Fed Chair Yellen giving her semi-annual testimony to lawmakers in the early hours of tomorrow morning, ahead of a number of US data releases later in the week. The net result of all this will determine how markets track over the rest of the week.
For now though, the USD has continued to consolidate after showing some signs of recovery last week. Various USD indices are up in the order of 0.1-0.2%. US equities have pushed up to fresh records while US Treasury yields have edged a little higher.
So it’s a modest risk-on environment, with JPY dragging the chain, seeing USD/JPY up 0.5% to just under the 114 mark. There was no sustained market reaction to Q4 GDP data, which showed modest growth in Japan, broadly in line with expectations, and with net exports rather than domestic demand being the driver.
NZD/USD sits around 0.7170, down 30pips or so from the open yesterday and the local 5pm close. There was no positive reaction to the big rebound in electronic card transactions for January, up 2.7% m/m. To be sure, the data can be volatile, but it suggests that retail spending continues to run at a healthy clip as the New Year began. Movement over the rest of the week will largely be determined by Yellen’s testimony, the US data flow and any policy snippets from Trump.
NZD/AUD is steady around 0.9380 despite another strong day for iron ore prices. The Qingdao contract surged 6.5% yesterday, taking the year-to-date gain to nearly 20% and annual gain to nearly 100%. That the cross has consolidated in the face of more positive news for Australia might indicate that selling pressure in the NZD has been exhausted, after the market digested the combination of last week’s more upbeat RBA and an RBNZ trying to hose down rate hike expectations.
On the back of more positive sentiment for the USD, EUR/USD dipped below 1.06 this morning. Political risk in Europe doesn’t seem to be a factor overnight as bond spreads of France, Italy and Spain to Germany all narrowed. Germany’s 10-year rate was up 1bp to 0.33% while French, Italy and Spanish rates fell in the order of 3-5bps.
GBP has been the only major currency managing to hold its ground against the USD. GBP/USD is up slightly to just over the 1.25 mark on little news.
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