Euro, Aussie Slumps, DXY Soars as US Jobless Claims Tumble

Summary: New Zealand’s Dollar, referred by FX traders as the Kiwi, had its wings clipped after the RBNZ raised rates by 25 basis points. The move was widely expected, and coupled with a firmer US Dollar, the Kiwi tumbled to 0.6870, from 0.6952, a loss of 1.17%. Earlier in Asian trade, the NZD/USD pair hit a high at 0.6956 following the RBNZ’s move to raise the Official Cash Rate to 0.75% from 0.50%. RBNZ Governor Adrian Orr said that it would better for the bank to take small steps when raising the OCR to observe the development of the economy. Elsewhere, the number of Americans filing new claims for unemployment benefits plunged by 71,000 to 199,000 (week ended 20 November). It was the lowest number since 1969 and lower than economist’s forecasts at 260,000. The Australian Dollar slid 0.40% against the overall stronger Greenback to 0.7192 (0.7223). The Dollar Index, which measures the value of the Greenback against a basket of 6 major currencies, broke higher, settling at 96.85 (96.48 yesterday), its strongest since July 2020. FOMC meeting minutes showed that some officials want to adjust the QE’s pace of tapering and raise rates sooner if inflation continues to run high. The beleaguered Euro’s slide quickened, and the shared currency ended the New York session at 1.1200 from a 1.1250 open in Asia yesterday.

Sterling eased against the broadly based stronger Greenback to 1.3325 from 1.3380. The USD/JPY pair grinded higher, maintaining its climb above the 115.00 threshold, settling at 115.40 (115.02), its highest close since March 2017. Against the Asian and Emerging Market currencies, the Dollar was mostly higher. The USD/CNH pair (US Dollar-Offshore Chinese Yuan) rose to 6.3970 (6.3895) while the USD/SGD (US Dollar- Singapore Dollar) rallied to 1.3683 from 1.3656 yesterday. Global bond yields dipped. The US 10-year treasury note yield was last at 1.64% from 1.66%. However, the 2-year US treasury rate was up 3 basis points to 0.64% (0.61%). Other global 10-year yields were lower. Germany’s 10-year Bund yield eased to -0.23% from -0.22%. Australia’s 10-year treasury rate settled one basis point lower to 1.85%. New Zealand’s 10-year bond yield fell 5 basis points to 2.54% (2.59%).
Wall Street stocks rose. The DOW finished at 35,803 (35,747). The S&P 500 gained 0.3% to 4700.

Data released yesterday saw Japan’s Flash Manufacturing PMI climb to 54.2, beating forecasts at 53.5. Japan’s Annual BOJ Core CPI was at 0.6%, matching a previous 0.6%, but better than estimates at -0.4%. Germany’s IFO Business Climate eased to 96.5 from 97.7, and lower than estimates at 96.8. US Preliminary Q3 GDP growth was at 2.1%, better than 2.0% in Q2, but lower than forecasts at 2.2%. US Durable Goods Orders fell to -0.5% in October from September’s 0.4%, missing estimates at 0.2%. US Core Durable Goods Orders matched forecasts at 0.5%. US Goods Trade Deficit in October improved to -USD 82.89 billion from a previous -USD 97.03 billion. US October New Home Sales eased to 745,000 from 800,000, and forecasts at 801,000. US October Personal Income rose to 0.5% from -1% and beating median expectations of 0.2%. Personal Spending climbed to 1.3% from 0.6%, beating estimates at 1.0%. University of Michigan November Final Consumer Sentiment beat estimates at 66.9, climbing to 67.4, but lower than a previous 71.1.

  • NZD/USD – The Kiwi tumbled 1.17% lower in choppy trade following the RBNZ’s decision to raise its Official Cash Rate by 0.25 basis points to 0.75%. The NZD/USD pair hit an overnight high in Asian trade to 0.6956 before traders clipped the Bird’s wings. The Kiwi finished at 0.6870 (0.6953 open yesterday).
  • EUR/USD – the shared currency extended its slide to finish at 1.1200, down 0.38% from its 1.1250 opening in Asia yesterday. Overnight low for the Euro was at 1.1186, not seen since early July 2020. Covid cases in Europe continue to rise with Germany reporting over 70,000 infections, its largest one-day increase.
  • USD/JPY – The Greenback grinded higher against the Japanese currency to finish at 115.40 from 115.02 yesterday. Despite lower US bond yields, the USD/JPY pair climbed on the better than forecast US Weekly Jobless Claims report as well as stronger Personal Income and Spending data.
  • AUD/USD – slip-sliding away, the Aussie fell under the weight of broad-based US Dollar strength and the fall in the Kiwi. Overnight, the AUD/USD pair hit a low at 0.7184 before climbing to settle at 0.7192. Overnight high traded for the Aussie Battler was at 0.7227.

On the Lookout: Today’s economic calendar is light as the US celebrates its Thanksgiving Holiday today. New Zealand kicks off today’s reports with its NZ Trade balance for October. Median forecasts are for a fall in New Zealand’s Trade Deficit to -NZD 1,575 million from September’s -NZD 2,171 million. Japan releases its Annual SPPI (Services Producer Price Index – f/c 0.9% from previous 0.9%). Germany starts off European data with its GDP Growth Rate (q/q f/c 1.8% from 1.6%, y/y f/c 2.5% from 9.8% - ACY Finlogix), German December GFK Consumer Confidence Index (f/c 0.5 from 0.9 – ACY Finlogix). The ECB releases its Monetary Policy Meeting Accounts.

ECB President Christine Lagarde is due to speak at an ECB Legal Conference via satellite. Bank of England Governor Bailey is due to speak at a moderated discussion with renowned Egyptian/American economist Mohamed El-Erian at the Cambridge Union.

Trading Perspective: With little in the way of economic data releases and the big US Thanksgiving Day holiday today, traders will focus on the ECB’s release of its latest monetary policy meeting accounts. ECB President Lagarde and BOE Governor Bailey are also speaking today. Liquidity will be at a premium so we can expect some choppy trading. Any contrasts between the US Federal Reserve and the ECB and BOE with reference to the pace of tapering and the subsequent move to hike rates will be closely scrutinised. Yesterday’s RBNZ was widely expected. While some Fed officials sought to adjust the pace of QE and raise rates sooner should inflation continue to run hot. This enabled the Dollar Index (DXY) to break higher to 96.85 from 96.48, and its highest close in 15 months.

  • EUR/USD – slip siding away, the Euro continues to trade lower. The shared currency tumbled to 1.1186 before settling to finish in New York at 1.1200. Weaker German IFO Business Climate as well as a continued rise in Europe’s Covid cases are keeping the Euro depressed. Immediate support for today lies at 1.1185 followed by 1.1155. On the topside, immediate resistance can be found at 1.1230 and 1.1260. Look for further choppy trade in a likely range today of 1.1170-1.1230.
  • NZD/USD – The Bird had its wings clipped following a dovish rate hike by the RBNZ. Governor Orr’s comments that it would be better to take small steps in raising rates to observe the development of the economy didn’t help the Kiwi. NZD/USD finished at 0.6870 from 0.6952 yesterday, down 1.17%. Immediate support today lies at 0.6850 (overnight low 0.6856). The next support level lies at 0.6835 and 0.6805. Immediate resistance can be found at 0.6900, 0.6930 and 0.6960. Look for further volatility in the Bird today. Likely range 0.6830-0.6930. Not getting too bearish down here.

(Source: Finlogix.com)

  • AUD/USD – the Aussie fell under the weight of broad-based US Dollar strength and a lower Kiwi. The Battler finished at 0.7192 from 0.7223 yesterday. Overnight the Aussie traded to a low at 0.7184. Immediate support for today lies at 0.7180. The next support level lies at 0.7150. A clean break of 0.7150 could see a sustained slide to 0.70 cents and lower. Immediate resistance can be found at 0.7230 followed by 0.7260. Australia releases its Private Capital Expenditure data for Q3, which is forecast to fall to -1.9% from a previous 4.4%. That’s a huge change and any number outside of that (higher or lower) will see the Battler motor. Look for a choppy session in a likely trade between 0.7150-0.7250.
  • USD/JPY – the Dollar climbed higher against the Japanese currency to finish at 115.40 from 115.02 yesterday. Overnight high traded was at 115.52. Immediate resistance today lies at 115.50. The next resistance level is found at 115.80, and then 116.10. On the downside, immediate support can be found at 115.10 followed by 114.80. Look for a volatile session in this currency pair too. Likely range today 114.75-115.75.

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