Quiet weekend sees NZD hold in range
Friday’s local session saw another quiet day’s trade with a range of 0.6638 - 0.6656. The weekend also saw limited volatility with a range of 0.6617 - 0.6657. With no data released in NZ on Friday, and limited USD data, there was little chance of a breakout. The NZD rallied to its highs on the back of poor US housing data which showed housing starts down 15%. This morning the NZD opens around 0.6640.
AUD gains falter ahead of 0.7700
With no domestic data releases on Friday, the AUD traded within a narrow 0.7656 – 0.7672 range during the local session. Despite a broadly stronger USD in the offshore session the currency continues to find yield based support as expectations of a Japanese rate hike by the end of the year recede. The AUD rallied from an overnight low of 0.7643 to set an intra-day high of 0.7694. The currency failed to strengthen through 0.7700 however, and drifted lower to 0.7685 from where the market opens this morning.
USD steadies after sharp fall
The USD ended the session softer across the board, hurt by a surprisingly weak US home sales report, followed by rumours about trouble at a large US hedge fund which rapidly accelerated the greenback’s declines. The hedge fund in question denied these rumours but the damage had been done. As a result the euro climbed back through 1.2800 to finish the session near its highs whilst the yen strengthened to knock the dollar back below 118.00. Once the dust settled the USD recovered slightly to finish the week higher, having weathered multiple soft economic reports and negative sentiment throughout the week.
US housing starts fall 14.6% in October. Housing starts plunged to their second lowest monthly pace in nine years in October, while permits to build recorded their ninth consecutive monthly decline, reaching their lowest since early 1998. The annualised pace of starts in October was 1486k (down 34% on their January 2006 peak, just nine months earlier), a little below permits on 1535k (31% below their October 2005 peak), so there are grounds to expect at least a modest starts recovery in coming months. But unless that recovery is impressive, it now seems likely that dwelling investment spending in Q4 will fall at around the same pace it did in Q3 (i.e. close to 20% annualised).
Euroland trade deficit narrows to €0.9bn in Sep. The trade deficit narrowed in September as import growth stalled but exports growth continued. Lower oil prices helped on the import side, but the European deficit with China remains at an all time record high on a year-to-date basis.
G20: solid pace for globe. Policymakers and central bankers (including the Fed Chairman) said the economy will continue to expand at a solid pace. Attendees also resisted efforts to fast-track IMF quota (voting right) reform, saying reform of voting rights should include "a new, transparent and simple quota formula which captures IMF members' relative economic positions".
