Kiwi supported by strong retail print
Thursday 23 August, 2018
Daily Currency UpdateThe New Zealand Dollar traded in a fairly muted sideways pattern yesterday, maintaining a forty-point range over the past twenty-four hours. Opening the morning just below the US 67 cent handle, the Kiwi was initially bolstered by a bullish retail sales reading for the 2nd quarter of 2018.
The seasonally adjusted reading of 1.1%, was a full 0.8% higher than the previous quarter, showing a more robust outlook for the local economy and pushed the NZD to a two-week high of 0.6718.
The Core retail sales reading which excludes vehicle and fuel categories also showed a strong reading of 1.4% versus a forecast of 0.8% and points towards a stronger print for GDP figures due for release on September 20th.
The NZD/USD was eventually sold off in the European session to an overnight low of 0.6880 before the greenback was slightly sold off following the release of FOMC minutes this morning after noting GDP Growth would slow in the second half of 2018. The key points were that many participants said it would likely “Soon” be appropriate to raise interest rates. It is widely expected that the Fed will increase in September with the markets pricing in a 96% chance.
The New Zealand dollar eventually settled just below the US 67 cent mark again as little on the domestic docket today is likely to push the domestic currency either way.
Looking forward to tomorrow, market participants look toward the release of Julys Trade Balance figures as the New Zealand dollar currently swaps hands at 0.6700.
Key MoversThe Australian Dollar moved within a 20-pip range on Wednesday between levels of 0.7350 and 0.7370 and despite the Australian Bureau of Statistics releasing the official constriction work done figures showing a 1.6 per cent rise in the June quarter the Aussie didn’t budge. Total building work on homes was up 3.1 per cent in the three months, while work on non-residential buildings grew by a more modest 1.3 per cent.
Meanwhile at the Economic Society of Australia Business Luncheon in Brisbane, Deputy Governor Debelle said in a speech he expected inflation to remain around 2.25% at least for the next couple of years.
Despite all of the US news coverage regarding former Trump campaign manager and the former Presidents lawyer the Greenback hasn’t been affected, in fact it has remained well supported as the Fed Minutes confirmed they remain on track for a hike next month.
There is no local data due out today and investors will be keenly attuned to the annual Jackson Hole gathering where in attendance will be central bankers, finance ministers, academics, and financial market participants from around the world.
The Great British Pound edged marginally higher through trade on Wednesday, consolidating early week gains and maintaining a tight trading handle for much of the day. Having broken back above 1.29 on Tuesday the pound held onto gains touching two-week highs at 1.2935.
After making new 14 month lows last Wednesday Sterling has found support breaking a 6 week run of losses on broader USD weakness and an uptick in Brexit optimism. British and EU officials commenced fresh talks this week sparking renewed hope an agreement will be reached by the next deadline in October. While mixed messages are filtering through with EU officials sceptical the original divorce date will be met British Brexit ministers are confident an agreement can be negotiated sparking near term optimism and driving short term support. Said gains are highly conditional to ongoing Brexit upside and the pound remains vulnerable to a sudden shift in optimism.
With little of note on the macroeconomic docket out focused remains with the Brexit narrative. A key driver through this week and the short term will be the release of a report from the May government that analyses the consequences of a “NO DEAL” Brexit. The report is due before the end of the week. Watch resistance on moves approaching 1.30 and support at last weeks 14 month low.
Overnight US equities closed slightly lower as the S&P 500 hit its 3,453rd day without a major correction. It’s now the longest bull market in history. US and Chinese officials began further trade talks in Washington. This Thursday, the latest $16 billion worth of tariffs on Chinese imports will go into effect, expectations for the meetings are low, since they are taking place between lower-level officials
On the data front yesterday saw the release of US released July Existing Home Sales figures, which by the way, disappointed by falling 0.7% vs. an expected advance of 0.6%. Federal Open Market Committee (FOMC) minutes hinted a September rate hike, but added a dovish note, as concerns over how trade disputes could disrupt growth have increased.
From a technical perspective, the EUR/USD pair extended its rally overnight reaching a high of 1.1622. The USD/JPY pair also traded higher reaching an overnight high of 110.61. The Pound Sterling advanced to a fresh weekly high of 1.2935.
The Euro continued its upward trajectory, posting modest gains in overnight trading. Opening this morning at 1.1597 against the US Dollar, the Euro looks fairly reactionary at present, turning to its counterpart for direction. Domestically, the economic calendar remains light-on.
The biggest news to impact the Euro was President Trump’s announcement that he would slap a 25% tariff on all cars from the European Union. Immediately the market responded with a small decline to kick off the session. Fortunes improved for the Euro however when the FOMC released their meeting minutes. The primary focus was that the September rate hike is almost 100% nailed on and that the FOMC has deepening concerns on trade disruptions. The market responded to the meeting minutes negatively, with the USD marginally falling across the board. Overall, it was a day of marginal movements and trading conditions continued to be light.
Moving into Thursday, the Euro is slated to enjoy a bit more data with the PMI figures slated for release. Traders will also be keeping a close eye on the on-going political drama enfolding in the United States.
The Canadian Dollar is weaker this morning when valued against the US Dollar. The USD/CAD pair slumped after the release of dismal retail sales data. Following a 2.2% increase in May, retail sales edged down 0.2% in June to $50.7 billion. Sales were down in 6 of 11 subsectors, representing 52% of total retail trade.
Moving forward into the week, the domestic economic calendar remains light with the focus squarely placed on on-going US-China trade talks that is slated to start today.
From a technical perspective, the USD/CAD pair is currently trading at 1.2994. We continue to expect support to hold on moves approaching 1.2959 while now any upward push will likely meet resistance around 1.3048.
- NZD/AUD: 0.9050 - 0.9130 ▼
- GBP/NZD: 1.9200 - 1.9400 ▲
- NZD/USD: 0.6650 - 0.6720 ▼
- NZD/EUR: 0.5720 - 0.5800 ▼
- NZD/CAD: 0.8650 - 0.8780 ▼