USD weakness was the key theme over the past 24-hours.
The AUD and NZD were the strongest performers.
The trigger for broad-based USD weakness was the release of the disappointing US retail sales report. The data showed no rebound in April.
The result begins to question whether the soft patch of US 1Q data can simply be attributed to unseasonably cold winter weather. This knocked the USD index sharply lower. From 94.50 the index now trades at 93.60.
The EUR/USD traded with only limited response to regional GDP releases over the course of the evening. However, it was spurred higher following the US retail sales data. From 1.220 the EUR/USD has traded up to 1.1360 currently.
The GBP gapped higher last evening after the release of UK unemployment data. Although in line with expectation, the data continued the trend improvement that has been in place since late 2011. However, enthusiasm for the GBP was temporarily curtailed by the release of the BoE’s inflation report soon after. The Bank downgraded its growth forecasts through 2017 and also highlighted downside risk to inflation over the first half of its three year forecast period. But the GBP/USD recovered after the US retail data, to trade at 1.5740 this morning.
The AUD/USD was on the ascendancy from late last evening. The release of the US retail sales report then allowed it to break through the late-Apr highs around 0.8080, to sit at 0.8100 this morning. This is its highest levels since late January.
The NZD/USD was also stronger overnight. Its knee-jerk dip in response to yesterday morning’s FSR was short-lived. Overnight, the NZD endeavoured to pace the AUD higher in a contest it ultimately lost. The NZD/AUD has declined from late evening highs above 0.9300 to sit at 0.9220 currently. However, the NZD/USD is around 1.4% higher than this time yesterday, at 0.7470.
Today the domestic focus will be the release of NZ Q1 retail sales data. We look for a 1.3% increase in the quarter, taking the annual expansion in real retail spending to 5.8%. A strong number may only serve to contrast with last night’s disappointing US retail data, and help maintain positive near-term NZD momentum. NZD/USD resistance is eyed at 0.7500, while support is seen at 0.7420.
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Kymberly Martin is on the BNZ Research team. All its research is available here.