Buyers emerge to push NZD higher overnight
Favourable housing data and continued buying of JPY saw the NZD slightly higher in our time zone yesterday, with some initial selling around 0.6600 noted. It was a different story overnight however, with euro strength and a variety of buyers, including stop-loss buying, combining to push the NZD just above 0.6660 where it eventually met with profit taking. The currency opens this morning about 50-points higher on a trade-weighted basis.
AUD higher, again struggles to break 0.7700
It was a very quiet day for the AUD yesterday as the currency traded in a narrow 17-point range, with a slight cautious upward bias prompted by NZD strength. Overnight trading also saw the AUD push higher, with buyers taking it just short of 0.7700 where it again found resistance. Ahealthy correction sees it down and opening this morning around 0.7665.
USD remains strong despite easing in consumer spending
The USD eased initially overnight as Oct CPI came in below expectations, causing the euro to spike to a high of 1.2842. The USD however strengthened against most major currencies later in the overnight session even though US data releases were slightly below forecasts. The euro weakened after Eurozone CPI came in as expected and the UK retail sales jumped in Oct. GBP rallied to 1.8935 but failed to kick on as expectations of a further interest rate hike have already been discounted and has eased to today’s open of 1.8874. The yen opens today at 118.25 after the BoJ held interest rates as expected.
Bank of Japan on hold, as widely expected. The consensus is that the Bank will move again in the first quarter of next year. We feel that the Dec meeting is the likely window, given recent official commentary and the data flow between now and then. Quarterly updates on actual and expected capital spending and corporate balance sheets (MoF survey December 4, BoJ Tankan December 15) ahead of the decision on ecember 19 hold the key.
US core CPI 0.1% in Oct. The big news of the day was the softest core CPI increase since Feb this year: quite a surprise, although it was down to just three components in the CPI basket, the “three As” – airfares, autos, and apparel. Elsewhere, the usual culprits kept generating inflationary pressure. The headline CPI fell 0.5% on energy prices.
US Philly Fed survey struggles to 5.1. The factory index posted a lacklustre recovery back into positive territory after two very weak monthly readings, but the detail in the report was not impressive: orders declining for the second month in three, shipments barely improved and jobs growth stalled. The contrast with the booming manufacturing environment in the neighbouring New York Fed district is stark.
US industrial production up 0.2% in Oct. The hard data on October manufacturing was not impressive either. A rebound in utility output as the weather normalised prevented an IP fall, but manufacturing was constrained by weakness in auto production and sluggish even excluding the auto sector. NY district aside, there has clearly been a slowdown in US industry in recent months, something the national ISM has been accurately signalling.
But US NAHB homebuilder sentiment rises from 30 to 33 in Nov. The good news on the economy was the further confirmation that the housing downturn is finding a bottom.
Other US news: Initial jobless claims fell 2k to 308k, continue to point to a healthy labour market. The September TIC data were solid enough at $65.1bn in the context of the very impressive inflow figures for the prior month.
Euroland CPI was confirmed at 1.6% yr in Oct, down from 1.7% yr in Sep. The core rate was unchanged at 1.5% yr in October.
UK retail sales bounced back 0.9% in Oct, after Sep’s surprise fall. The detail showed non-food sales up 1.6%, more than reversing the prior month’s 1.1% fall. Also in Oct, 48% of the RICS surveyors reported rising house prices – the strongest RICS report in four years.
