The USD has pushed higher in the early hours of this morning. Still, ‘commodity-linked’ currencies managed to hold on to some of their earlier gains.
The NZD/USD was the key outperformer, gaining more than 1% over the past 24-hours.
General risk appetite improved overnight, buoying equity and credit indices on either side of the Atlantic. The prospect of less-imminent Fed rate hikes appears to have contributed.
Commodity prices have also shown a decent rebound. The CRB global commodity index has risen almost 1.5% since the end of last week.
Our risk appetite index (scale 0-100%) has risen from last week’s lows of 23% to 39% currently.
Actual data delivery was uninspiring overnight. Services PMI indices came in below expectation on either side of the Atlantic.
The Eurozone retail sales number came in flat for the month of August, as expected, although upward revisions to the previous month’s data boosted annual sales growth.
The EUR/USD made intra-night highs, above 1.1280, soon after this data release but later succumbed to broad-based USD strength. It trades at 1.1180 this morning.
The GBP took a sharp step lower late last evening, after the release of a disappointing UK Services PMI. From intra-night highs above 1.5240, the GBP/USD now trades at 1.5150.
The ‘commodity-linked’ AUD, CAD and NZD were the best performers over the past 24-hours, with the kiwi leading the pack. They made steady gains last evening before succumbing to the broadly stronger USD in the early hours of this morning.
However, the NZD/USD has still managed to make a sizable gain since the start of the week. From 0.6460 yesterday morning, the NZD/USD traded up to 0.6530 late last night, now trading around 0.6500.
Overnight, a deal in the long-negotiated Trans-Pacific Partnership has finally been reached. Headlines suggest Fonterra may be “very disappointed” by the limited gains for dairy in the TPP Agreement.
Expect this to capture attention today, though the greater influence for the NZD will likely be the outcome of the latest GDT diary auction early tomorrow morning. We anticipate another gain, following the 48% rebound in prices already seen since mid-Aug.
This may provide further support to the NZD/USD, though resistance will likely be encountered on a move back into the 0.6530-0.6560 window.
This morning the NZIER Business Opinion Survey will also be released.
The focus for the AUD today will be this afternoon’s RBA meeting. Our NAB colleagues see it as unlikely that the RBA’s statement will encourage the market in its rate cut expectations. Near-term this may help the AUD/USD to hold onto some of its recently won gains.
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Kymberly Martin is on the BNZ Research team. All its research is available here.