Kiwi’s wings cut off on conciliatory RBNZ rise, USD / JPY soars

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Euro, Aussie collapse, DXY soars as US jobless claims plummet

Summary: The New Zealand dollar, known by FX traders the kiwi, saw its wings cut off after the RBNZ raised rates by 25 basis points. The move was widely expected, and coupled with a stronger US dollar, the Kiwi fell to 0.6870, from 0.6952, a loss of 1.17%. Earlier in Asian trading, the NZD / USD pair hit a high of 0.6956 following the RBNZ decision to raise the official exchange rate to 0.75% from 0.50%. RBNZ Governor Adrian Orr said it would be best if the bank took small steps when increasing OCR to observe the development of the economy. Elsewhere, the number of Americans filing new claims for unemployment benefits plunged from 71,000 to 199,000 (week ended November 20). It was the lowest number since 1969 and lower than the economist’s forecast at 260,000. The Australian dollar slipped 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 highest level since July 2020. The minutes of the FOMC meeting showed that some officials wish to adjust the pace of QE to gradually decrease and raise rates sooner if inflation remains high. The fall of the besieged euro accelerated and the shared currency closed the New York session at 1.1200 versus 1.1250 in Asia yesterday.

The British pound eased against the stronger broad based greenback at 1.3325 against 1.3380. USD / JPY climbed higher, maintaining its rise above the 115.00 level, standing at 115.40 (115.02), its highest close since March 2017. Against Asian currencies and emerging markets, the dollar was mostly higher. USD / CNH (US dollar-Chinese offshore yuan) climbed to 6.3970 (6.3895) while USD / SGD (US dollar-Singapore dollar) climbed to 1.3683 from 1.3656 yesterday . Global bond yields have fallen. The yield on 10-year US Treasuries was last at 1.64% from 1.66%. However, the 2-year US Treasury rate rose 3 basis points to 0.64% (0.61%). Other global 10-year yields were lower. The yield on the 10-year German Bund eased to -0.23% from -0.22%. The Australian 10-year Treasury rate fell one basis point to 1.85%. The yield on New Zealand 10-year bonds fell 5 basis points to 2.54% (2.59%).
Wall Street shares rose. The DOW finished at 35,803 (35,747). The S&P 500 gained 0.3% to 4,700.

Data released yesterday saw the instantaneous rise of the Japan Manufacturing PMI to 54.2, beating a forecast at 53.5. Japan’s BOJ’s annual base CPI was 0.6%, tying a previous 0.6%, but better than estimates at -0.4%. The IFO business climate in Germany eased to 96.5 from 97.7, and below estimates at 96.8. US GDP growth in preliminary Q3 was 2.1%, better than 2.0% in Q2, but lower than forecast at 2.2%. Durable goods orders in the United States fell to -0.5% in October from 0.4% in September, the missing estimate at 0.2%. Core durable goods orders in the United States were on target at 0.5%. The US merchandise trade deficit in October improved to -82.89 billion USD from 97.03 billion USD previously. US new home sales in October declined to 745,000 from 800,000 and forecast to 801,000. US October personal income fell from -1% to 0.5% and exceeded median expectations of 0.2%. Personal spending climbed to 1.3% from 0.6%, beating estimates at 1.0%. The University of Michigan’s final November consumer sentiment topped estimates at 66.9, climbing to 67.4, but lower than a previous 71.1.

  • NZD / USD – The Kiwi fell 1.17% in choppy trading following the RBNZ’s decision to raise its official spot rate by 0.25 basis points to 0.75%. The NZD / USD pair hit an overnight high in Asian trading at 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. The euro’s overnight low was 1.1186, unprecedented since early July 2020. Covid cases in Europe continue to rise, with Germany reporting more than 70,000 infections, its largest increase in a daytime.
  • USD / JPY – The greenback climbed higher against the Japanese currency to end at 115.40 from 115.02 yesterday. Despite the decline in US bond yields, the USD / JPY pair climbed on the back of the better-than-expected US weekly jobless claims report as well as stronger personal income and spending data.
  • AUD / USD – Slipping away, the aussie fell under the weight of the generalized strength of the US dollar and the fall of the kiwi. Overnight, AUD / USD hit a low of 0.7184 before rising to 0.7192. The night traded high for the Aussie Battler was 0.7227.

On the lookout: Today’s economic calendar is light as the United States celebrates its Thanksgiving holiday today. New Zealand launches today’s reports with its New Zealand trade balance for October. The median forecast is for New Zealand’s trade deficit to decline to – NZD 1,575 million from NZD 2,171 million in September. Japan publishes its annual SPPI (producer price index for services – f / c 0.9% against 0.9% previously). Germany starts the European data with its GDP growth rate (t / qf / c 1.8% from 1.6%, y / yf / c 2.5% from 9.8% – ACY Finlogix), the German GFK consumer confidence index for December (f / c 0.5 from 0.9 – ACY Finlogix). The ECB publishes its monetary policy meeting accounts.

ECB President Christine Lagarde is due to speak at an ECB satellite legal conference. Bank of England Governor Bailey is due to speak in a moderate discussion with famed Egyptian / American economist Mohamed El-Erian at the Cambridge Union.

Commercial perspective: With few economic data releases and the big Thanksgiving holiday in the US today, traders will focus on the ECB releasing its latest monetary policy meeting accounts. ECB President Lagarde and BOE Governor Bailey also speak today. Liquidity will be at a premium, so we can expect choppy trading. Any contrast between the US Federal Reserve and the ECB and BOE in terms of the pace of the cut and subsequent rate hike movement will be closely scrutinized. Yesterday’s RBNZ was widely anticipated. While some Fed officials have sought to adjust the pace of QE and raise rates earlier if inflation continues to soar. This allowed the Dollar Index (DXY) to break higher at 96.85 from 96.48, and its highest close in 15 months.

  • EUR / USD – move away, the euro continues to trade lower. The shared currency fell to 1.1186 before settling to end in New York at 1.1200. The weaker German IFO business climate along with a continued rise in Covid cases in Europe is keeping the euro depressed. Immediate support for today is at 1.1185 followed by 1.1155. On the upside, immediate resistance can be found at 1.1230 and 1.1260. Look for other choppy exchanges in a likely range today of 1.1170-1.1230.
  • NZD / USD – The bird has had its wings clipped following an accommodating rate hike by the RBNZ. Governor Orr’s comments that it would be better to take small steps to raise rates in order to watch the economy develop did not help the Kiwi. The NZD / USD closed at 0.6870 from 0.6952 yesterday, down 1.17%. Immediate support today sits at 0.6850 (overnight low at 0.6856). The next level of support is at 0.6835 and 0.6805. Immediate resistance can be found at 0.6900, 0.6930 and 0.6960. Look for additional volatility in the bird today. Probable range 0.6830-0.6930. Not too bearish here.

(Source: Finlogix.com)

  • AUD / USD – the aussie fell under the weight of the generalized strength of the US dollar and a weaker kiwi. The Battler finished at 0.7192 from 0.7223 yesterday. Overnight the Aussie traded low at 0.7184. Immediate support for today sits at 0.7180. The next level of support is at 0.7150. A clear break of 0.7150 could see a sustained slide to 0.70 cent and below. Immediate resistance can be found at 0.7230 followed by 0.7260. Australia releases its data on private investment spending for the third quarter, which is expected to fall to -1.9% from 4.4% previously. This is a huge change and any number outside of that (higher or lower) will see the Battler engine. Look for a choppy session in a probable trade between 0.7150 and 0.7250.
  • USD / JPY – the dollar climbed higher against the Japanese currency to end at 115.40 from 115.02 yesterday. The overnight high traded was 115.52. Immediate resistance stands today at 115.50. The next level of resistance is at 115.80 and then 116.10. On the downside, immediate support can be found at 115.10 followed by 114.80. Also look for a volatile session in this currency pair. Probable range today 114.75 to 115.75.


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