NZD follows AUD lower overnight
Yesterday was an opportunity for exporters to buy NZD’s below 0.6600, however the chance did not last long as the currency drifted up to around 0.6625 over the course of the day, largely prompted by USD weakness. Earlier, the currency did rally marginally on the release of better-than-expected Q3 PPI data which showed prices rose 2.0%, or 6.9% annually. Output prices rose 0.7%, or 4.5% for the year. Given the lack of significance the data has on monetary policy, the NZD quickly corrected itself to where it was before the data was released. Overnight selling saw the NZD under pressure, with the currency opening today around 0.6600.
Favourable business conditions support AUD
After opening on its lows the AUD rallied over the course of the day, partially prompted by a stronger JPY, as the currency ended the day just short of 0.7650. Support was also found from the Oct NAB business survey which showed that business conditions remain surprisingly robust, up four points to +18. However, with the market overbought of AUD, traders appeared hesitant to take the currency too much higher. USD weakness led to a higher AUD overnight before selling knocked it back to this morning’s opening level around 0.7660.
Japanese GDP growth strengthens
The USD had a mixed day yesterday with the JPY weakening from a high of 118.18 to a 117.25 low following a robust Q3 GDP reading. US retail sales fell in Oct which also dampened any chance of further dollar gains. Comments from the French Prime Minister Dominique de Villepin caused a sell off in the euro as his remarks were seen as a call for a weaker euro to aid exports and growth in the eurozone. The euro fell sharply from an overnight high of 1.2872 to 1.2790 and opens this morning around 1.2817. Sterling recovered some of Monday’s losses during yesterday’s local session trading back to a high of 1.9051. These gains were more than reversed with an overnight low of 1.8925 due to the UK October CPI falling short of expectations with 2.4% change yr/yr.
Japanese Q3 GDP rose 2.0% annualised, 2.7%yr. The headline outcome was above expectations, but close enough to our own figuring.
US retail sales fall 0.2% in Oct. Retail sales fell because of a continued slump in the value of gasoline sales. Despite industry data showing a 2% decline in auto sales, auto dealerships reported a modest sales gain in October – that sometimes happens. Excluding those factors, core retailing rose 0.3%, close to our 0.4% forecast. But the big news was a cumulative 0.7ppt downward revision to sales ex autos & gas in August and September, led by the building materials category. Adownward revision to the consumer spending component of Q3 GDP growth now seems inevitable.
US core PPI plunges 0.9% in Oct. The PPI was distorted once again by wild swings in factory vehicle prices, mainly reflecting new model year pricing irregularities that the seasonal adjustment process can’t get to grips with. Excluding vehicles, the core PPI would have risen 0.1%. These vehicle price swings won’t be reflected in the CPI on Thursday, although the energy price falls should be.
Other US news in brief: A fall in retail auto stocks constrained business inventory growth to a 0.4% gain. Sluggish weekly retail data: Redbook up 0.3% and chain store sales down 0.8%.
Euroland GDP growth slowed to 0.5% in Q3, almost certainly only half of the Q2 growth pace, which has not yet been revised higher in this advance report but should be when updated data are published.
UK CPI annual rate unchanged at 2.4% yr in Oct, against widespread expectations of renewed acceleration.
