Kiwi trades within a tight range despite risk-off tone
Monday 11 February, 2019
Daily Currency UpdateThe Kiwi traded within a relatively tight range for much of Friday, consolidating its position after a disastrous employment report on Thursday. Moving into a new week, the New Zealand Dollar opens this morning at 0.6742. Global markets traded with a risk-off tone for much of Friday as President Trump said he wasn’t planning on meeting President Xi before US tariffs are set to increase on March the 1st. The news is a blow to risk sentiment with financial markets turning decidedly risk-off for much of the session. Despite the global tone, the Kiwi was remarkably resilient with few movements in the FX space. Other NZ markets were not so luck with a sharp move lower on NZ swap rates and 10 year bond yields falling to a record low of 2.1%. This week looks to be another big week for the New Zealand Dollar with the RBNZ set to release their monetary policy statement on Wednesday. Monday and Tuesday and relatively quiet however, with direction to be driven by the headlines.
Key MoversThe AUD opened at 0.70890 against the USD, coming down from a 1 day high of 0.70952 earlier in the morning. This drop, caused by the release of the RBA Monetary Policy statement, was just the next of many events that punished the AUD in the past week. RBA Governor Lowe announced Friday that they would shift its monetary policy from its long-standing tightening bias to a neutral stance, and downgraded its growth forecasts. The next macroeconomic releases are scheduled for Tuesday and Wednesday, with the Australian Bureau of Statistics releasing their Home Loans day, showing the change in number of new loans granted for owner-occupied homes. Major banks NAB and Westpac will also release their own data regarding business confidence and consumer sentiment respectively.
The Great British Pound pulled off weekly highs of 1.2996 after failing to capitalise on Thursday night gains as Britain continues to hope for an amicable Brexit deal with the European commission. With little domestic data to finish the week, a false break higher was initially supported by Bank of England’s Mark Carney on Thursday. Carney commented to the market that there is no expectation of any interest rate cuts this year with analysts predicting a couple of hikes this year. Cable opened Friday at 1.2950 and slid 0.12% lower to close the week lower at 1.2935 as investors look towards several releases in the UK this evening including GDP figures for Q4 2018 Bank of England recently downgraded annual growth figures in their last Monetary Statement release on Thursday to 1.2% for 2019 and the lowest since the Global Financial Crisis a decade ago. Fourth Quarter results is expected to decelerate following concerns of an global economic slowdown affecting the local region as economists project growth to halve to 0.3% from the 3rd quarter of 2018. This morning the Great British Pound opens at 1.2935 against the US Dollar.
The US Dollar index which measures the greenback strength against a basket of developed currencies touched a new high for 2019 as comments made by President Trump bought some nervousness amongst the stock markets. The DXY hit a high of 96.69 after Trump said it was “probably too soon” to be meeting with the Chinese President. Hopes that a deal can be reached to stop a new round of U.S import tariffs on Chinese imports coming into force in March seem to be on the back burner yet again. If an agreement is not met, tariffs on USD 200bn worth of Chinese goods will rise from 10% to 25%. Market participants are awaiting a raft of delayed US data in the wake of the shutdown of the Federal government. These data include durable goods orders, retail sales growth, core inflation and Q4 GDP growth which will probably be released during the week.
The Euro closed the week around a two-week low with support at 1.1300 against the Greenback. Last week we saw the Euro post its steepest weekly drop (decline of 1.1 percent) against the Greenback in over four months in the wake of data that showed an economic slowdown in Europe was spreading. On the data front there aren’t any relevant macroeconomic releases scheduled today. Looking ahead this week and on Wednesday we will see the release of Industrial Production for the month of December. On Thursday we will see the release of Q4 Gross Domestic Product for both Germany and the EU. Also on Thursday we will see the release of Q4 EU flash employment data. Finally on Friday we will see the release of EU Trade Balance for the month of December. From a technical perspective, the EUR/USD pair is currently trading at 1.1319. We continue to expect support to hold on moves approaching 1.1315 while now any upward push will likely meet resistance around 1.1340.
The Canadian Dollar has strengthened against the Greenback on the back of surprisingly strong local economic data. The USD/CAD moved from levels around 1.3325 down to 1.3232 following an impressive January employment data. Statistics Canada revealed that the number of employed in Canada rose by 66.8k in January driven by jobs for youth in services and record private-sector hiring, a sign of strength in an economy facing several other headwinds. Economists were forecasting only a 5k employment increase in January. Despite that increase, however, the unemployment rate rose to 5.8% amid a higher participation rate. There is no local data due today. On a technical front, first line of support sits at 1.3240 followed by 1.3220. On the flip side, resistance is up at 1.3300.
- NZD/AUD: 0.9480 - 0.9560 ▼
- GBP/NZD: 1.9100 - 1.9240 ▲
- NZD/USD: 0.6700 - 0.6820 ▼
- NZD/EUR: 0.5920 - 0.6000 ▲
- NZD/CAD: 0.8900 - 0.8990 ▼