News and views
Risk currencies slightly firmer. The US dollar weakened until late London, possibly affected by Moody’s review of California’s A2 credit rating. The dollar then rebounded off its 80 (DXY) low after the US navy reportedly intercepted a North Korean ship, but was still 0.4% lower on the day. S&P500 sagged mid-session, after a strong opening, to close up only 0.3%. Tech shares fared better, Goldman Sachs upgrading Microsoft, and the Nasdaq closed up 1.2%. Commodities were weaker, oil down 2.6%, after the US Energy Department said inventories rose, and total daily demand for fuels is now 6% lower than a year ago. Copper fell 0.9%. The Fed’s Hoenig said inflation is a long-term threat and the Fed was seriously thinking about its exit strategy. US 10yr treasuries initially weakened to 3.88% before posting a decent rally to 3.78%.
EUR spiked to 1.4010 late in the London session, but closed NY at 1.3935. GBP rallied from 1.6355 to 1.6560. USD/JPY fell from 97.20 to consolidate just above 96.00.
AUD ground higher from 0.8045 to 0.8120 late London, falling back to around 0.8050. News that Australia’s opposition leader called on the PM and treasurer to resign over links to a Queensland car dealer was ignored by the currency market.
NZD rallied from 0.6395 to 0.6485, closing at 0.6425. AUD/NZD weakened from just over 1.26 to just under 1.25, closing in NY at around 1.2450.
No US data to report.
German producer prices flat in May, but the annual rate was down 3.6% yr, the fastest pace of decline in over two decades.
Canadian retail sales down 0.8% in April. Retailing started Q2 on a soft note with auto related sales down nearly 2% (including the impact of lower gasoline prices). Furniture, food, pharmacy and clothing stores also recorded weaker sales, the exception being a modest rise in DIY.
Outlook
NZD should have a slightly firmer tone today, following the positive close in US equities, as well as the likelihood of better NZ migration and credit card reports due today. We retain a weekly negative bias for NZD as long as 0.66 holds.
