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Kiwi gives up gains as CNY still under pressure

By OFX

The New Zealand dollar opens lower this morning having fallen sharply through trade yesterday as the uptick in risk appetite enjoyed following reduced trade tensions faltered. The NZD touched intraday highs at 0.6851 following an upbeat press conference between President Trump and EU Commission President Jean Claude Juncker where both leaders promised to work toward zero tariffs. The impromptu press conference helped ease concerns linked to an escalating trade war and fostered a short term upward run on commodity currencies. The Kiwi however then gave up gains as investors expect Trump attentions to return to US-Sino trade hostilities. As the tariff battle between the US and China continues and the CNY remains under pressure the upside demand for the NZD will likely be short.

Opening this morning 8 tenths of a cent lower the Kiwi currently buys just 0.6779 U.S cents as attentions turn to an all importing US GDP indicator. With expectations for an exceptionally strong Q2 a print at or around 4.8%-5% could prompt a USD extension into the weekend and see the Kiwi test lows nearing 0.6720.

The Australian Dollar once again is back under the 74c handle against the Greenback relinquishing all gains from the session prior. The AUD/USD suffered at the hands of a stronger U.S Dollar falling from 0.7463 down to 0.7372. The move was sparked by a sharp drop in copper prices and markets squaring up positions ahead of top tier US data out later today US time.

Speaking of which, locally yesterday Australian Import Prices increased at a faster-than-expected pace in the three months ended June, figures from the Australian Bureau of Statistics revealed. The import price index climbed 3.2 percent sequentially in the second quarter, faster than the 2.0 percent rise in the first quarter. It was the third consecutive quarterly increase and above the 1.9 percent rise economists had forecast. The increase was driven by higher prices paid for petroleum, petroleum products and related materials, general industrial machinery, electrical machinery, apparatus and appliances. On a yearly basis, imports prices grew at a faster rate of 6.0 percent in the June quarter, after a 2.6 percent gain in the March quarter. Data also revealed that export prices grew 1.9 percent quarterly and by 6.6 percent yearly in the June quarter.

The domestic docket sees PPI figures due at 11.30am AEST, figures are expected to remain flat at 0.5%. Markets will be closely watching tonight’s US Q2 GDP figures with consensus for growth of 4.2%. Technical levels to watch; support at 0.7330 and 0.7310 with resistance 0.7400 and 0.7430

The Great British Pound reached a high of 1.3212 yesterday against the greenback, its highest for this week, however the Sterling gave up most of those gains on the back of renewed Brexit-related fears. The GBP/USD pair closed around 1.3100. The Sterling looks to remain under pressure against its rival counterparts over coming months as markets eye the UK's March 2019 Brexit date and buy protection against a substantial move lower in the Pound in the event of no deal being reached.

On the data front today sees the release of Nationwide Housing Prices in July, which are expected to show a 0.5% rise from June and a 2.0% rise since July 2017.

From a technical perspective, the GBP/USD pair is currently trading at 1.3106. We continue to expect support to hold on moves approaching 1.3090 while now any upward push will likely meet resistance around 1.3145.

The United States Dollar strengthened over the last 24 hours, reversing its declines over the previous day. The catalyst was again President Trump who, along with EU President Juncker, agreed to hold off on tariff implementation so that both sides could negotiate a deal. Closer to home, US economic data was mixed with monthly trade balance and headline durable goods orders weaker than expected. This morning, the Greenback opens 0.59% higher at 94.79, against a basket of currencies.

The major headline over the last 24 hours was the ceasefire in on-going trade tensions between the US and EU. While the comments by both presidents after the meeting were vague and unhelpful, a halt on tariff implementation is nevertheless more than the market expected. The positive market sentiment saw equity markets and the EUR appreciate significantly initially, although these were both later reversed due to unrelated announcements. Nevertheless, positivity returned to the market which led to a small recovery for the Greenback.

Closing out the week, attentions turn to US, second quarter GDP figures for direction.

EURUSD dropped to a weekly low, down 0.8% to 1.1640 after the ECB kept rates unchanged, as expected, and reiterated a pledge to keep them flat until mid-2019.

On the other hand, the market is turning bullish towards the USD and the release of US 2Q GDP Tonight should be an interesting event to watch. From a technical perspective, support is expected at 1.1575 (July 19th low) and resistance at 1.1791 (July 9 high).

The USDCAD ended the session 0.20% higher, in line with broad USD strength against all major currencies, at 1.3072. The loonie was trading at the highest level in a month versus the USD, around 1.3030, but couldn’t hold onto gains despite comments by US Trade Representative Robert Lighthizer around NAFTA and the possibility of reaching a tentative accord next month.

Support for the USDCAD sits now on yesterday’s lows around the 1.3030s while 1.31 should act as short-term resistance.