NZDUSD currently trading at 0.7250, expected to rise on current risk appetite; Equities up across the US, Asia and Europe; USD continues to edge lower; AUD lower against the USD and NZD after lower than expected CPI

By Doug Steel

Markets are in a buoyant mood, with equities leading the charge. Bond yields are higher, gold has fallen. It’s risk on. Our global risk appetite index sits at a very healthy 77% – it’s highest since September 2014.

The Dow broke through the psychological 20,000 barrier for the first time overnight. The S&P pushed on to another new high, up around 0.7% at the time of writing. The lift followed solid gains through Asia yesterday that extended across Europe. The Euro Stoxx 50 index closed up 1.4%.

In currencies, the USD continued to edge lower overnight with the DXY index dipping 0.3% and dipping below the 100 level for the first time since early-December. The CAD, GBP and NZD were the top performers overnight, while the AUD was down the bottom of the leaderboard.

The GBP/USD punched above 1.26 for the first time since mid-December. The GBP was already on the rise before a UK business survey showed optimism rising to a 2 year high and well above longer-term averages.

JPY found some support yesterday from a bigger than expected trade surplus, but gave back ground in the risk on environment. USD/JPY is currently sits around 113.70.

Not surprisingly, the NZD is performing well in the generally positive mood. The NZD/USD is higher than yesterday, currently trading around 0.7250. Our short term model still favours NZD/USD higher, boosted by current risk appetite, but NZ CPI data will likely dictate direction today.

The NZ TWI poked above 79.50 in the early morning, to its highest level since April 2015, aided by a lower AUD.

The AUD was hit yesterday as CPI inflation undershot expectations, although the core measures were in line with market (and RBA) expectations. The headline miss saw the AUD quickly fall from around 0.7590, toward 0.7530, and lower, before finding its feet. The AUD currently trades around 0.7550.

NZD/AUD was hovering around its 50-day moving average around 0.9540 prior to the AU CPI data, leaping to around 0.9600 shortly after.

In Trump news, the US President signs an executive order to set in motion the building of a Mexican border wall. The MXN has fallen circa 15% since the US election last year.

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Daily exchange rates

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