Stronger US data gives USD momentum; GBP weaker as further easing signalled by BoE chief economist; NZ CPI tipped to be 0.6%

By Kymberly Martin

The USD and JPY were stronger on Friday night. The NZD and GBP were amongst the weakest performers.

The USD was boosted by stronger-than-expected US data delivery early on Saturday morning. It gained further support heading into the close, from ‘safe haven’ demand as news broke of the attempted military coup in Turkey. The USD index, at 96.60, now sits at the top of its post-‘Brexit’ range.

The GBP/USD was under renewed pressure from the early evening. Its downward momentum was cemented by a speech from Bank of England’s chief economist, Haldane, which pointed directly at further easing next month. The GBP/USD traded down from early evening highs above 1.3450 to end the week just below 1.3200.

The EUR/USD was also dragged lower, and gained a further nudge in the early hours of Saturday morning on the news of the attempted coup. The EUR/USD ended the week below 1.1040.

The NZD/USD traded lower on Friday night as the market readies itself for the two key domestic events this week; today’s CPI release and Thursday’s RBNZ speech. Although our pick for today’s CPI release (0.6% y/y) is marginally above consensus it is aligned with the RBNZ’s published forecasts. It would take a much stronger print, in our view, to assuage the RBNZ’s fears about the impact that current NZ TWI strength will have on its goal of returning CPI to its 2% target over the medium-term.

This is likely to be a theme in its intra-meeting economic update on Thursday. If communicated with conviction, this could see the NZ TWI under downward pressure later in the week. Near-term technical support is eyed at 0.7080 ahead of 0.6990.

On the crosses, the NZD/GBP has rebounded from recent lows below 0.5320 to end the week at 0.5400, as the Bank of England appears primed for August easing.

The NZD/AUD remained under pressure on Friday morning. Its downward momentum following the robust AU employment report on Thursday remained intact.

However the NZD/AUD twice found support at the 0.9350 level before rebounding to end the week just below 0.9400. The cross now trades not far from model-derived ‘fair value’.

Following on from today’s NZ CPI release, tomorrow’s release of RBA Minutes will be the next fundamental event with potential to impact the cross.

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Daily exchange rates

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for(i=0;i

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