NZD climbs ahead of US Thanksgiving holiday
The NZD drifted sideways during yesterday’s local session, trading a very tight range of 0.6693 - 0.6704. With the carry trade stories still circulating the NZD should continue to be buoyant. Overnight saw more volatility for the NZD as it came off the day’s highs down to a low of 0.6677 rather quickly. This was reversed as quickly as USD weakness stormed the market as traders sold the USD ahead of US Thanksgiving Day holiday. The NZD reached session highs of 0.6724 and opens today at 0.6710.
AUD rallies on takeover talks
The AUD has broken higher overnight after making steady gains throughout all of yesterday local session. The USD weakening boosted the AUD to highs of 0.7762. The AUD also gained support following talk of a takeover of Qantas by a consortium including Macquarie Bank and Texas Pacific Group. The Westpac MI Leading Index, which indicates the likely pace of economic activity 3 to 9 months into the future, was 5.3% in Sep compared to last month’s 6.1%. Although the growth rate has slowed the growth implied is still strong. The AUD remains well supported this morning opening around 0.7758.
USD falls to 5½ month low against the euro
A quiet night turned into a bloodbath for the USD as it plummeted against the majors with the move lower exaggerated by thin trading volume ahead of the public holiday. Softer than expected consumer sentiment added to the dollar’s woes however it was well offered beforehand and the economic data just added weight by giving traders a fundamental reason to push the dollar lower. As a result the euro reached a 5½ month high of 1.2958 and yen cracked 117.00 en route to a two month high of 116.36 against the dollar. GBP was also well supported on the day despite the BoE minutes revealing that 2 out of the 9 policy makers were opposed to the recent interest rate hike. It easily cleared 1.9100 and opens around 1.9140 this morning.
Japanese trade data highlights the soft patch for exports. Japan's trade balance rose to ¥615bn in Oct from ¥420bn in Sep, assisted by a 3% decline in imports, with oil prices the major factor at play. The bigger story is the moderation in the year-ended rate of expansion on the export side, which is a mainly a result of the gyrations of the technology cycle. Nominal export growth decelerated from 15.3%yr to 11.6%, while volumes slowed from 7.5%yr to 2.2%.
Japanese all-industry activity index fell 0.9% in Sep. This is a pretty dated piece of data, coming two weeks after Q3 GDP and one after the tertiary activity index. IP was down 0.7%, services decline 1.3%, public administration fell 0.1%, and construction was flat.
US consumer sentiment revised a little lower. Uni of Mich consumer sentiment was revised down slightly from 92.3 to 92.1, meaning Nov saw more slippage than in the preliminary report. That is at odds with other sentiment indicators for Nov, which have generally been stronger. This survey may have picked up a little more disappointment that gasoline prices have not continued plunging, than the other surveys.
US initial jobless claims were weaker last week (up 12k to 321k), with no obvious factor explaining the rise. Continuing claims picked up in the prior week too. Add this news to yesterday’s report that state payrolls gains in October summed to 50k less than the 92k national gain (meaning any revision to the national number might be downward rather than upward), and a picture of a slightly softer job market emerges.
Canadian inflation accelerated from 0.7% yr to 0.9% yr in Oct. The headline rate just recovered a small part of its Sep gasoline price-related plunge, but the core rate continued to drift higher, to 2.3% yr. A BoC rate cut is very unlikely in the next few quarters.
The minutes to the BoE Nov policy meeting showed a surprise 7:2 split, with the two dissenters preferring no change in rates, rather than the 25bp rate hike that was decided upon. The dissenters were Rachel Lomax, deputy governor of the BoE (hence the surprise), and one of the external members, US-based David Blanchflower (a known dove). This is helpful for Westpac’s view that rates might already have peaked at 5.0%.
