Oil prices jumped higher mid-afternoon yesterday after energy ministers of Saudi Arabia and Russia said they favoured extending oil production cuts by nine months to the end of Q1 2018. Major oil-producers are scheduled to meet later this month. After starting the week around US$50.80, Brent crude oil prices immediately leapt higher then extended gains overnight to above $US52.50 before settling back under $52 currently; up 1.9% on the day.
Equities markets have pushed higher, with the S&P500 currently up circa 0.4% supported by the energy and materials sector. US 10-year Treasury yields have edged a basis point higher, while the USD has remained on the backfoot. The DXY dollar index is around 0.3% lower. US data was mixed overnight with a stronger NAHB housing index but a weaker Empire Manufacturing survey.
Higher oil prices saw commodity currencies back in vogue, although they pared gains as oil came off its highs through the night. The CAD tops the currency leaderboard, currently up 0.5% against the USD at around 1.3640. NOK is up about 0.2%. On the flipside, JPY has underperformed with USD/JPY up 0.3% at 113.70.
The NZD saw little response yesterday to a much softer PSI and relatively muted, although upward, movement on better than expected Q1 retail sales. Overnight, the NZD initially found support from higher oil prices before paring gains. From opening around 0.6850 yesterday, NZD/USD pushed up toward 0.6920 overnight, before pulling back as oil peaked. The NZD continues to lick its wounds from the towelling it received post last week’s RBNZ statement. NZD/USD opens this morning around 0.6880 about where we left it late yesterday afternoon.
In contrast to the NZD, the AUD has managed to hold on to some gains overnight, up 0.4% at around 0.7420, with no lasting impact from yesterday’s generally softer Chinese activity data. This sees the NZD/AUD open this morning 0.2% lower at about 0.9270. Little new news is expected from the RBA minutes today.
Global commodity prices have recently been more important for the NZD than NZ specific commodity prices; so keep watching oil. In any case, we are not expecting much change overall at the latest GDT auction overnight tonight, although we do anticipate lower wholemilk powder prices which may give the auction a negative hue.
EUR/USD is up 0.4%, at 1.0980, having tested up toward 1.1000 during the night. A positive meeting between Germany’s Merkel and New French President Macron didn’t do the single currency any harm.
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