Soft US data helps NZD to 0.7000
NZD/USD had a quiet beginning to Friday with no local data for release. The NZD managed to drift gradually higher throughout the afternoon and went into the offshore sessions trading circa 0.6950. The NZD was the only notable outperforming currency on Friday night, rallying just shy of 0.7000 on expectations that the RBNZ will hike interest rates next month. Weaker than expected US housing data added fuel to speculation that the Fed will have to cut rates earlier than initially thought this gave the NZD another boost and early this morning it touched above 0.7000 for the first time since Jan.
AUD finishes week on quiet note
The AUD closed out the week in subdued fashion on Friday but was given a late lift following a poor housing starts number for Jan. AUD/USD kept to a very narrow 0.7832 to 0.7854 range during local trading with few flows of note. Offshore trading also began slowly but more weak data out of the US gave the AUD reason to rally to 0.7875 early this morning. The AUD lost ground against the NZD however, NZD/AUD opens at 0.8890 this morning.
USD posts steep weekly decline
Although the week ended on a quiet note on Friday, the USD posted its steepest weekly decline in two months against a basket of major currencies. US data releases showed housing starts decline to the weakest level since 1997 and a slide in the consumer confidence number. The USD recovered some ground late in the trading session to close little changed against EUR, around the 131.40 mark. USD/JPY bounced off a one month low of 118.98 to push back through 119.20 as the JPY rally appeared to run out of steam. However USD was still down about 2% versus JPY and looked set to record its biggest one week drop since May 06. GBP lost ground against USD and hit a six week low versus EUR as recent data began to undermine sentiment and the argument for further hikes in the UK comes into question.
US producer prices fall 0.6% in Jan. The producer price data appear to have settled down after the volatility through the second half of last year when changed pricing practices in the auto/truck sector pushed the core rates around violently. The headline PPI decline of 0.6% reflected a 4.6% fall in energy prices, which will reverse in February. The core rate has settled back into a trend around 0.2% per month, which is perhaps a little high given that truck prices showed some renewed downside again last month. There was also some upward pressure apparent in core crude prices.
US housing starts fell spectacularly in Jan. The 14.3% fall was led by a 24% plunge in multiples, which had risen 34% in December. Single family starts were very weak in January as well, down 11.2%. Total starts’ annualised pace of 1408k in January was the lowest in nearly 10 years. The regional breakdown shows the biggest losses were in the West, down nearly 29% (and 34% for single family starts, after a 10% rise in December). Weather doesn’t explain that.
US housing permits down 2.8% in Jan. The permits data were less dramatic, although the size of the fall was constrained by a further modest rise in multiples after a 23% surge in December. Single family permits fell 4% to a new low for this cycle. Still, with total permits running a 1568k pace, way above starts, that suggests scope for a starts bounce in coming months.
US UoM consumer sentiment down 3 6 pts to 93.3 in Feb. Consumer sentiment slipped in early February, probably reflecting the upturn in gasoline prices after their temporary fall in January.
The Euroland trade balance was €0.7bn in Dec, the fourth surplus in a row after nearly a year of deficits. Higher oil prices helped explain the narrowing in the surplus from November’s €4.4bn.
