NZD follows AUD lower overnight
It was a quiet day for the NZD yesterday as the currency clung close to 0.6650 in the absence of any intraday direction. However some attention was on this week’s upcoming retail sales data, with markets appearing reluctant to buy NZD’s ahead of Wednesday’s release. Significant NZD selling, coupled with USD strength, saw the currency under pressure overnight and it opens this morning just below 0.6600.
AUD eases as pressure mounts
The AUD also traded quietly yesterday as the markets ignored a signal from the RBA in its quarterly policy review that interest rates may still possibly have to rise again. The Bank’s main focus was on inflation as it predicted that underlying inflation would likely remain at the top of its 2-3% target band; at the same time they drew attention to the economy’s lack of spare capacity after 15 years of uninterrupted growth. Like the NZD the AUD also fell on the back of broad based USD strength; this morning sees the currency open around 0.7620 after trading slightly below that level overnight.
USD recovers from lows
The USD has strengthened across the board as investors took profits on the recent good run the majors have had of late. The euro has fallen from yesterday’s high of 1.2877 to a low of 1.2799 which is close to today’s open. Sterling also has tumbled from its 1½ year highs to a low of 1.8998 last night as UK October producer prices brought the annual rise back to 1.7%, compared to a market forecast of 2.3%. The GBP opens today slightly up again at 1.9003. The JPY weakened following a statement by Shoichi Nakagawa, policy chief of Japans ruling Liberal Democratic Party, in which he stated he opposed tightening of Japans monetary policy. The JPY opens today at its highs of 118.22.
Japanese upstream price pressures ease a touch. October corporate goods prices fell 0.3%, pushing the annual rate down to 2.8%yr. That compares to a 3.6% rate in September. Final stage domestic demand goods prices are down 0.1%yr, with capital goods (+0.2%mth, +0.1%yr) somewhat stronger than the consumer segment. Pass through from raw materials price gains to final stage goods remains extremely muted based on this evidence.
Japan's current account surplus narrowed in September. The seasonally adjusted balance fell to ¥1409bn in September, a decline of some ¥200bn from August. Both the trade surplus and the services deficit moved adversely in the month. That was partially offset by the income surplus, which widened to ¥1266bn. We anticipate that the surplus will widen in coming quarters as the income position should remain strong, while declining import prices will boost the trade balance.
US Federal Budget deficit as expected. The October deficit of $49.3bn was in line with expectations.
UK producer prices rise 0.3% in Oct. This increase in the core output PPI followed a revised 0.2% rise in Sept, which means that just as energy prices started falling, factory were lifting prices of other products. This will be of concern to the Bank of England.
