News and views
A quiet night. US equities gained modestly after 3 days of losses, the S&P500 closing up 1.0%. US data was mixed, PPI on expectations, but jobless and continuing claims worse. That aside, there was little news of significance, and no standout market moves. US 3mth Libor extended an astonishing run of consistent 1-3bp falls since early March, falling 3bp to 0.85%. US 10yr notes defied the equities bounce to gain by 3bp.
EUR gained from 1.3560 to 1.3665 on the equities rebound. A plethora of ECB officials commented on their individual views of the economy and interest rates, with no clear message emanating. Their forecasters did revise growth downwards to -3.4% for 2009, and +0.2% for 2010. The SNB said they were implementing a weaker CHF policy, but USD/CHF slipped from 1.11 to 1.10. USD/JPY was well contained between 95.10 and 95.80; ex-MOF’s Sakakibara said he expected sub-90 eventually.
AUD made a recent low overnight at 0.7465 before US equities opened, followed by a bounce to 0.7620. A late Bassanese article called for more RBA rate cuts, given rising unemployment, without specifying timing.
NZD moved in tandem, from the 0.5865 low to 0.5990. AUD/NZD remained stuck in its wide domestic session range of 1.2660 to 1.2795.
US producer prices up 0.3% in Apr. This was driven by the first significant rise in food prices in five months, higher gasoline prices, lower gas prices and a mild 0.1% increase in the core PPI.
US initial jobless claims rise 36k to 637k. This reversed the prior week’s drop but still leaves claims below the 674k peak in late March, so it remains the case that the pace of layoff and retrenchment has eased slightly. The Labor Dept noted auto industry layoffs as a significant factor this week without quantifying the effect. There was also a steeper than average surge in continuing claims in the prior week, up 202k to 6560k, indicative of a continued rise in the unemployment rate.
Outlook
Global sentiment offered no strong clues last night, so we look to technicals for a signal for NZD today. The bearish case will be confirmed if we see a move below 0.5865, while a move above 0.6000 would argue this multi-day sell-off has ended. Today’s retail sales report will be worth watching.
