The Opening Bell: Where currencies start on Friday, March 2, 2018

By Dan Bell

The NZDUSD opens at 0.7221 (mid-rate) this morning.

The NZD is the best performer of the G10 Currencies overnight, gaining 1% against our neighbour the AUD.

The Kiwi had a brief flutter under the 0.7200 support yesterday afternoon, reaching a low of 0.7186, and not quite the Feb 8 low of 0.7175. This formed an upside down “V” in the hourly chart, with 0.7437 Feb 16 high as the top. The price action is still above the 200 day moving average which is also at 0.7175 forming a strong pivot point, and near term support as a double bottom.

The upturn in the UK manufacturing sector slowed further during February. At 55.2, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to an eight-month low and lost further ground after hitting a 51-month high last November. Manufacturing production increased at the slowest pace for 11 months in February, with decelerations seen across the consumer, intermediate and investment goods sectors.

The number of Americans filing for unemployment benefits unexpectedly fell last week, hitting the lowest level in more than 48 years, pointing to a rapidly tightening labour market. Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 210,000 for the week ended Feb. 24, the lowest level since December 1969.

U.S. Economic activity in the manufacturing sector expanded in February, and the overall economy grew for the 106th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business. The February PMI registered 60.8%, an increase of 1.7 percentage points from the January reading of 59.1%.

Fed Chairman Powell testified at the Semiannual Monetary Policy report before the Senate Banking Committee. While the hourly candle in the charts traded the biggest range in the past 24 hours at the time, the direction was unchanged as the Kiwi continued higher to 0.7253. Key takeaways were: “some continued strengthening on the labour market could take place without generating inflation”, “fiscal policy will likely put upward pressure on inflation this year” “I expect to see more wage increases”.

The catalyst of the Kiwi coming off its overnight highs was U.S. President Trump announcing he will place tariffs on steel and aluminium imports – a move that could trigger retaliation from trade partners who may target American products. The sign off will be next week. The USD strengthen 0.5% from there.

Global equity markets are lower except China: Dow -1.32%, S&P 500 -0.97%, FTSE -0.78%, DAX -1.97%, CAC -1.09%, Nikkei -1.56%, Shanghai +0.44%.

Gold prices fell 0.9% or $12 currently trading at $1,306 an ounce. WTI Crude Oil prices plummeted 2.9% currently trading at $60.96 a barrel.

Current indicative rates:

NZDUSD 0.7221 0.1%
NZDEUR  0.5919 0.2%
NZDGBP 0.5262 0.5%
NZDJPY 77.15 0.2%
NZDAUD 0.9353 1.0%
NZDCAD 0.9307 0.7%
GBPNZD 1.8996 -0.6%

Upcoming Data releases (NZST):

  • 10:45am – NZD – Building Consents m/m
  • 1:00pm – AUD -HIA New Home Sales m/m

 

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »

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