By Kymberly Martin
Most currencies traded fairly contained ranges overnight as the US celebrated Labour Day. The JPY outperformed, while the CAD and NOK were supported by a rise in the oil price.
The NZD/USD has traded off early evening highs to sit just above 0.7300 currently.
Markets were generally fairly orderly overnight in the absence of US participation due to Labour Day.
The global oil price gained a boost last evening as headlines announced that Russia and Saudi Arabia (the world’s two largest crude producers), had agreed to cooperate to try and stabilise prices. But no specific measures were actually announced, only a vague reference to “a number of tools at our disposal for joint actions”.
WTI oil price futures initially rose around 4.5%, but enthusiasm subsequently faded. Gains have now been trimmed to 1.6%. The ‘oil-linked’ CAD and NOK have also given back some of their evening’s gains but are still outperformers overall. The USD/CAD trades at 1.2930 this morning.
The GBP/USD pushed sharply higher last evening after the release of a stronger than expected August UK services PMI. It rebounded from 47.4 to 52.9. Recall, a reading above 50 reflects a sector in expansion. This suggests ‘Brexit’s harsh impact on the services sector may have proved temporary. But, after initially surging above 1.3370 the GBP/USD has returned to trade at 1.3300 currently.
The NZD/USD was on a steady ascent yesterday but peaked in the early evening above 0.7340. It drifted off overnight to sit just below 0.7310 at present. The NZ TWI continues to hover just below the 78.00 level, where it peaked in mid-July. This is almost 3% above where the RBNZ had projected the TWI to average in the coming quarter, in its (upwardly revised) published track in the August MPS.
A resilient currency and continued low CPI readings are key reasons to expect the RBNZ to cut the OCR again by year-end. We expect a cut in November.
Ahead of today’s RBA meeting the AUD/USD trades just above 0.7580. We and the market expect no change from the RBA today. The event may pass without creating too many ripples for the AUD. However, the market will peruse RBA comments for subtle change of tone since the last meeting.
BNZ Markets research is available here.