The Opening Bell: Where currencies start on Wednesday, September 6, 2017

By Dan Bell

The NZDUSD opens at 0.7246 (mid-rate) this morning.

After a quiet start to the week on Monday, the NZDUSD traded a 106 point (1.5%) range overnight Tuesday and outperformed all the G10 currencies in the past 24 hours.

The RBA left rates unchanged yesterday afternoon at 4:30pm at 1.5% which was widely expected and they stated that rates were consistent with CPI and GDP goals.

A Trump tweet stating “I am allowing Japan & South Korea to buy a substantially increased amount of highly sophisticated military equipment from the United States,” saw an immediate reaction in USD. The USD weakened and the Kiwi early morning rally began.

Ninety minutes later the NZD rallied again strongly on the release of the latest Global Dairy Trade (GDT) auction, the 5th sale of the 2017/18 season. Prices rose 0.3% following a 0.4% decline at the previous sale. Whole Milk Powder prices, however, fell 1.6% following a 0.6% decline previously while Skim Milk Powder prices fell 1.2%. There was a fresh advance in butter prices which increased 3.8% from the previous auction to just below the $6,000 per tonne. Prices remain slightly below highs seen in December 2016 which will cause some concern, although the main feature has been a sharp decline in volatility over the next four months.

UK service providers recorded solid rises in business activity and incoming new work during August, but rates of growth eased since July and remained notably weaker than seen on average in the first half of 2017. The latest survey also pointed to stronger cost pressures across the service sector, with the rate of input price inflation the fastest since February.

At 53.2 in August, the headline seasonally adjusted IHS Markit/CIPS Services PMI Business Activity Index registered above the 50.0 no-change value for the thirteenth consecutive month. However, the index dropped from 53.8 in July and signalled the slowest pace of business activity expansion since September 2016.

New orders for U.S. made goods recorded their biggest drop in nearly three years in July, but orders for capital goods were stronger than previously reported, pointing to robust business spending at the start of Q3. Factory goods orders tumbled 3.3% in July, which was on expectation, amid a slump in demand for transportation equipment. June’s data was revised to show orders rising 3.2% instead of the previously reported 3.0% surge.

Global equity markets are mixed: Dow -1.04%, S&P 500-0.71%, FTSE -0.52%, DAX +0.18%, CAC -0.34%, Nikkei -0.63%, Shanghai +0.14%.

Gold prices rallied $11 or 0.8% currently trading at $1,344 an ounce. WTI Crude Oil prices surged 2.7% higher currently trading at $48.65 a barrel.

Current indicative rates:

NZDUSD       0.7246       1.1%
NZDEUR       0.6077       0.9%
NZDGBP       0.5556       0.2%
NZDJPY         78.74        0.2%
NZDAUD       0.9058       0.4%
NZDCAD       0.8969       0.8%
GBPNZD       1.7990      -0.2%

Upcoming Data releases (NZST):

  • 10:05am – USD – FOMC Member Kaplan Speaks

 

 

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

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