News and views
A quiet night. US equities provided no net direction, only managing a small extension to the 2-day rally at the opening bell, but then fading as energy stocks fell with the oil price. The S&P500 is unchanged as we write, and the Euro-stoxx closed down 0.5%. WTI oil is currently down almost 7%, attributed mainly to yesterday’s China trade numbers showing a plunge in imports. That data also hit copper, down 3%. The overall tone towards risk was mixed: gold’s +1% and US 10 year treasuries 8bp rally tilting slightly towards risk aversion, but the US dollar’s 1% fall suggesting the opposite. Currency markets are possibly building expectations from this weekend’s G20 meeting.
NZD replicated the AUD’s price action, rallying from 0.4980 to 0.5070, and consolidating above 0.5050. Yesterday’s minor data releases were largely ignore by the market, participants more concerned with positioning ahead of today’s RBNZ meeting.
After the China-export news led sell-off late yesterday’s domestic session, AUD consolidated for a few hours above 0.64, before rallying to around 0.6520, and again consolidating around 0.65. Given their similar price paths, AUD/NZD did little, ranging in the 1.28 to 1.2870 area, with more time spent around the lower bound.
EUR moved 2 cents on the post-China news recovery, up to 1.2815, and rests just below 1.28. Weak German data releases were ignored. GBP was dull, relative to its past week’s volatility, recovering from 1.3660 to rest around 1.38. The most interesting move from the majors was by JPY, strengthening from 98.70 to its current 97.20, in what looked like a short-squeeze.
US federal budget deficit for Feb was $192.8bn, in line with market expectation.
Japanese machinery orders slump continues in January. Orders fell another 3.2% in the month to be down a whopping 39.5%yr.
UK visibles trade balance was –£7.7bn, roughly as expected. The trade deficit is beginning to shrink after a decade of steadily expanding deficits.
Canadian new house prices fell 0.6%, as Canada’s housing market takes a new leg down. This was the steepest monthly decline in new house prices since 1991.
Outlook
The RBNZ reviews the OCR at 9am this morning, and given the market is divided between 50bp and 100bp predictions, a surprise one way or the other is likely (unless, of course, we get a neutral 75bp). A 50bp cut would likely see NZD higher, while 100bp would do the opposite. Support and resistance levels are broadly 0.40 and 0.51, respectively, and a break of either bound would be technically significant.
