HotForex Forex News

06:40 NZD/USD heavy, but bounces-off 0.6920 post-NZ data

The New Zealand dollar found some support from upbeat NZ credit card spending data, and hence, aids the recovery in NZD/USD from daily lows struck at 0.6922.

The Kiwi stalled its three-day sell-off and now looks to regain 0.6950 barrier amid a minor-retreat in the treasury yields, which boosts the demand for the NZD as an alternative higher-yielding Emerging Market currency.

Moreover, a broadly subdued US dollar also collaborates to the renewed upside seen in NZD/USD over the last hour. Meanwhile, the bulls also find some respite from persisting risk-on market profile amid easing political concerns.

Focus now shifts towards the US oil inventories data and Trump administration’s tax reforms plan’s announcement due later in the NA session.

NZD/USD Levels to consider                                                                              

To the upside, the next resistance is located at 0.6968 (daily pivot), above which it could extend gains to 0.6986/96 (20 & 5-DMA) and from there to 0.7050 (classic R2/ Fib R3). To the downside immediate support might be located at 0.6905/00 (Apr 12 low/ zero figure), and from there to 0.6887 (Mar 9 low), below 0.6836 (classic S3) would be tested.


06:16 BBG Survey: Economists see faster China growth, moderate consumer inflation

According to the latest Bloomberg survey, a majority of the economists polled upgraded their forecasts for China’s economic growth this year, while projecting that the consumer inflation will continue to moderate.

Key Points:

Bloomberg survey conducted from April 18 to 25, and compared with forecasts in the March poll. 

“Growth in the world’s second-largest economy unexpectedly picked up to 6.9 percent in the first quarter, clocking its first back-to-back acceleration in seven years

Economists cut forecasts for consumer price index gains, which they expect to average 1.6 percent this quarter, down from an earlier estimate of 2 percent. They lowered full-year CPI estimates to 2 percent from 2.2 percent in the previous survey.

Forecasts for the producer price index edged down to 6.7 percent for this quarter from 6.8 percent in the last poll, as analysts see a gradual easing of that pace in the coming year.”


05:52 Japan domestic economy is clearly picking up Nikkei

“BOJ has Japan’s economy right where it wants” is the title for the report from ‘The Nikkei’, which says, “While the Bank of Japan’s 2% inflation target remains elusive, the domestic economy is clearly picking up”.

Domestic economy is indeed picking up pace, if we take into account the fact that Japan import growth hit 3-year high in March.


05:51 BOJ to keep its policy stance intact on Thursday - Barclays

FX Strategists at Barclays provide their insights on what to expect from Thursday’s BOJ monetary policy review.

Key Headlines:

The BOJ is expected to keep its policy stance intact at its policy meeting this week.

In addition, Barclays expects the BOJ to leave its real GDP growth forecasts largely unchanged while lowering its core CPI projections, especially for FY17.

"Furthermore, the BoJ’s announcement of its JGB purchase plan for May (Friday) will be watched after reduction in the recent month. We expect it to keep buying ranges unchanged given that recent buying amounts have been at or above the middle of the ranges announced in April for all sectors and that"


05:46 EUR/USD: Bullish above 1.0900 on ECB taper hints & softer USD

The EUR/USD pair stalled its recent bullish momentum in the Asian session this Wednesday, and now enters a phase of consolidation, after the bulls ran into the key resistance of 1.0950 levels.

The spot is trying to defend the bids near 1.0935 region at the moment, moving slightly away from five-month tops reached at 1.0951 in the US last session.

The Euro extended its rebound versus the American dollar on Tuesday, after the US dollar took the back seat across the board amid risk-on trades and doubts whether the Trump administration will actually provide details on the tax reform plans on Wednesday.

The spot also remains underpinned amid easing French election-related anxiety, as a Macron win appears to be full priced-in by markets, with most opinion polls showing about 60% support for Macron against 39% for the anti-EU candidate Le Pen.

Also, expectations of some hawkish hints from the ECB, with markets widely anticipating the central bank to resort to taper talks, adds to the recent bullish tone seen behind the major.

Nothing of relevance for the major in the day ahead, and hence, the US tax reform plans announcement will hog the limelight later in the NA session.

EUR/USD Technical Levels

Technical resistances for the pair are aligned at 1.0950/51 (psychological levels/ 5-month tops), 1.0968/71 (classic R1/ Fib R2) and finally 1.1000 (key resistance). On the flip side, the spot finds next support at 1.0909/00 (daily pivot), a break below that level could open the door to 1.0866/67 (5-DMA/ classic S1) and 1.0775 (10-DMA).


05:38 Treasury yields rise as Fed rate hike bets rise

US treasury yields advanced on Tuesday as expectations that the Fed may raise interest rates at its June meeting increased after Trump said on Friday that tax cuts would be announced today.

According to CME data, Futures traders are pricing in a 71% probability of a June rate hike, up from 49% last Wednesday.

The 10-year treasury yield rose to 2.345%, the highest level since April 11. The yields hit five-month lows of 2.17% last week ahead of French vote. The risk-on in the markets also reduced the demand for the safe haven Treasuries, pushing the yields higher.

Investors await the sale of $62 billion in new short- and intermediate-dated supply. The Treasury auctioned $26 billion worth of two-year notes on Tuesday.

 

 

 


05:23 Aus headline CPI is now in the RBA s 2-3% target band for the first time in 9 quarters - GS

Analysts at Goldman Sachs out with their afterthought on the latest Australian Q1 2017 CPI report.

Key Headlines:

The data is not a touch weaker than expected

Important to note that there is a clear reacceleration at both the headline level (2.1% YoY vs. 1.5% last quarter) and underlying levels (Trimmed Mean: 1.9% vs. 1.6% last & Weighted Median: 1.7% vs. 1.4% last)

Headline CPI is now in the RBA's 2-3% target band for the first time in 9 quarters

Headline CPI would have to print incredibly soft (0.1-0.2% QoQ) next quarter in order to undershoot the RBA's forecasts

We think this is very conservative and hence we see upside risks to the RBA's forecast

We think there is sufficient momentum for RBA to upgrade their headline inflation forecasts over next few months and their underlying inflation forecasts later this year

On AUD:

AUDUSD rallied from 0.7535 to 0.7557 highs going in. and subsequently printed 0.7509 lows/0.7513 last

AUDNZD traded from 1.0855 to 1.0865 ahead of the number, then 1.0823 lows/1.0827 last

From a fundamental perspective, this weakness is probably a fade


05:06 AUD/JPY rejected at 87.00 on evidence of peak inflation in Australia

AUD/JPY was offered at 87.00 handle after the data released in Australia added credence to the ‘peak inflation’ argument.

The pair clocked an intraday low of 83.50 levels and was last seen trading around 83.63 levels.

What’s peak inflation?

Peak inflation is the word coined for potential rollover of inflation expectations and commodity prices. The data released in the advanced world over the last one month or so showed the CPI growth has stalled.

The latest to join the bandwagon is Australia. The data released today showed the first quarter headline CPI remained unchanged at 0.5% as opposed to the expected rise to 0.6%. The RBA’s ‘trimmed mead’ or core inflation did beat estimates, but failed to keep the AUD bid.

AUD/JPY Technical Levels

A breakdown of support at 83.23 (Apr 4 low) would open door for 82.97 (5-DMA), under which the losses could be extended to 82.18 (200-DMA). On the higher side, only a daily close above 83.82 (Mar 28 low) could yield a sustained rally to 85.05 (50-DMA) and 85.38 (100-DMA). 

 


04:44 US OMBs Mulvaney: Trump will not agree to include Obamacare subsidies in Spending Bill

The US President Trump's Director of the Office of Management and Budget (OMB) Mick Mulvaney crossed the wires now, via CNN, noting that Trump will not agree to include Obamacare subsidies in Spending Bill.


04:43 AUD/USD offered at 200-DMA on weaker Aussie CPI release

AUD/USD was offered at the 200-DMA level of 0.7553 after the first quarter consumer price index (CPI) missed estimates.

The currency pair dropped to a low of 0.7518 in a knee jerk reaction. An upbeat trimmed mean CPI did trigger a partial recovery to 0.7530; which quickly fizzled out.

RBA ‘trimmed mean’ CPI beats estimates

The losses are being capped at 0.7518 largely due to RBA trimmed mean CPI, which printed at 1.9% y/y, beating the estimated rise to 1.8% from 1.6%. The trimmed mean rose to 0.5% y/y as expected. The 'trimmed mean' is RBA's core inflation figure. 

The CPI remained unchanged at 0.5% q/q as opposed to the expected rise to 0.6%. That triggered the drop in the AUD/USD from the 200-DMA resistance.

Despite the miss on the CPI figure, the 10-year Aussie bond yield holds at 2.66%; the highest in April 3. Moreover, the resilience in the yield is largely in line with its global peers. The US 10-year yield sits at 2.33%; the highest level in more than two-weeks. 

AUD/USD Technical Levels

A break below 0.7491 (Mar 9 low) would open doors for a sell-off to 0.7417 (Dec 7 low) and 0.74 (zero figure). On the higher side, only a daily close above 0.7553 (200-DMA) would open up upside towards     0.7604 (50-DMA) and 0.7679 (Mar 30 high).

 

 


04:39 Australia s Q1 2017 CPI: Headline misses expectations

Following the sluggishness seen in Australia's Q4 2016 CPI readings, today's inflation figures for the Q1 2017 showed a mixed picture, with the headlines numbers missing expectations. However, the annualized CPI figures reached the highest rate since Sept quarter of 2014, while the core – trimmed CPI came in a tad firmer.

Main headlines

CPI headline q/q +0.5% vs  0.6% exp and 0.5% prior

CPI headline y/y +2.1% vs 2.2% exp and 1.5% prior

RBA trimmed mean +0.5% vs 0.5% exp and 0.4% last

RBA trimmed mean y/y +1.9% vs 1.8% exp and 1.6% last

Q1 KEY FIGURES

Rose 0.5% this quarter, compared with a rise of 0.5% in the December quarter 2016.

Rose 2.1% over the twelve months to the March quarter 2017, compared with a rise of 1.5% over the twelve months to the December quarter 2016.

OVERVIEW OF CPI MOVEMENTS

The most significant price rises this quarter are automotive fuel (+5.7%), new dwelling purchase by owner-occupiers (+1.0%), medical and hospital services (+1.6%) and electricity (+2.5%).

The most significant offsetting price falls this quarter are international holiday travel and accommodation (-3.8%), fruit (-6.7%) and furniture (-3.5%).


04:32 Australia Consumer Price Index (YoY) came in at 2.1%, below expectations (2.2%) in 1Q


04:31 Australia Consumer Price Index (QoQ) below expectations (0.6%) in 1Q: Actual (0.5%)


04:31 Australia RBA trimmed mean CPI (QoQ) meets expectations (0.5%) in 1Q


04:31 Australia RBA trimmed mean CPI (YoY) came in at 1.9%, above expectations (1.8%) in 1Q


04:20 PBOC set the Yuan reference rate at 6.8845

The People's Bank of China (PBOC) set the Yuan reference rate at 6.8845 vs. Tuesday's fix of 6.8833


04:16 Fox News: US navy destroyer has encounter with the Iranian ship - Livesquawk

Livesquawk reported headlines from Fox News earlier on the day, citing that US navy destroyer has encounter with the Iranian ship. No further details have been provided on the same.


04:11 Aussie Press: IMF forecasts should guarantee Australia retains its AAA credit rating

The Australian press published a piece overnight on the International Monetary Fund’s (IMF) outlook on the Australian economy.

Key Points:

IMF expects a $27 billion surge in federal and state tax revenue over the next four years

Will bring the combined budget position back to surplus by 2020, two years earlier than it predicted six months ago

If borne out in next month's budget, the IMF forecasts should guarantee Australia retains its AAA credit rating because net public sector debt peaks at a lower level and then starts declining more rapidly

The improved budget outlook is revealed in the IMF's global economic database and reflects the fund's upgrade of its forecasts for Australia's economy in its ­global economic review released last week


04:09 Iran plans to double Halfaya oil field output

As per Reuters report, “Iraq has launched the third and final phase of work to expand its southern Halfaya oil field, aiming to double its output capacity in 2018 to 400,000 barrels per day.”

“Halfaya, operated by PetroChina, is Maysan Oil's largest field, producing 200,000 of the company's total output of 380,000 bpd”, said Adnan Noshi, head of Maysan Oil Co.

“Expansion at Halfaya should raise Maysan's overall output to nearly 600,000 bpd in 2018,” he said.


04:04 AUD/JPY breaks higher, re-attempts 84.00 ahead of Aus CPI

The AUD/JPY cross finally brought an end to its overnight consolidation box in Tokyo, and broke to the upside amid an extended rally in the Asian indices, boosting the rate to test 84 handle.

Risk-on sentiment remains the underlying theme in Asia so far, diminishing Yen’s attractiveness as a safe haven across the board, while the higher yielding currency Aussie recovers ground and turns positive, benefiting from a better sentiment towards risk assets.

Reflecting risk-on market profile, the benchmark 10-year US yields trade near 2-week tops of 2.345, while the Asian stocks trade +0.65% to +1%.

However, the bulls remain cautious heading towards the Australian Q1 CPI data release, which is expected to shape up next direction for the AUD. Australia's Q1 2017 CPI preview - NAB

Technical Levels

Higher side: 84.47/50 (Apr 5 high/ psychological levels), 84.73 (50-DMA), 85 (zero figure)

Lower side: 83.47 (daily pivot), 83.23/16 (5 & 200-DMA), 83 (key support)


03:54 Gold drops to Feb high on broad based risk-on

Gold prices dropped to the February high of $1263 levels as the major US equity indices neared record highs, while the treasury yields jumped to two-week highs.

Risk-on trade is just sweeping the globe, thus investors have little incentive to hold the zero-yielding safe haven yellow metal. Strong US corporate earnings and Trump’s tax talk added fuel to Macron rally, making the risk-on rally a bit more sustainable. The geopolitical uncertainty appears to have fizzled out as well.

The drop in gold is in line with the losses in other traditional safe haven assets like Treasuries and funding currencies like Yen. The 10-year treasury yield rose to 2.34%, the highest level since April 11, meanwhile, the Dollar-Yen pair jumped to 111.35; its highest level since April 10.

Gold Technical Levels

A break above $1273.30 (Apr 7 high) would open up upside towards $1290 (Apr 21 high) and $1297.40 (Apr 17 high). On the other hand, a breakdown of support at $1263 (Feb high) could yield a sell-off to $1249.50 (Oct 7 low) and $1245.50 (Apr 5 low).

 


03:49 Eyes on AUD/USD for today - ANZ

Analysts at ANZ noted some key takeaways and events.

Key Quotes:

 "In Australia, the focus will be on Q1 CPI where our colleagues expect annual and core inflation to bounce to 2.0% and 1.7% y/y respectively."

"The NZD remained out of favour despite an improvement in global risk sentiment. 

The ANZAC holiday is likely to have had an impact on liquidity and CAD was dragged lower after tariffs were levied on lumber exports to the US. 

The big mover has been the EUR, which is close to a 5-month high after the first round of the French election. 

JPY underperformed as risk sentiment improved.

There will be a bias for the local curve to steepen on the open given global moves and with the 2-year trading lower during the London session."


03:45 China Press: China monetary policy needn t be too tight

China’s Securities Journal out with the latest headline this Wednesday, citing that the Chinese monetary policy need not be too tight, Livesquawk reports.


03:40 GBP/USD: Struggle with 1.2845 extends into Asia, despite risk-on

The GBP/USD pair extends its overnight side-trend into Asia and remains slightly offered below the mid-point of 1.28 handle, as the US bulls appear to find some respite after yesterday’s sell-off in the greenback across the board.

Cable remains confined within a 10-pips slim range, with the downside cushioned by persisting risk-on trades, after the Asian indices track the rally in their Wall Street counterpart, with full markets returning.

Over the last hours, the US dollar is seen recovering some ground against most of its major peers, in response to the latest Trump headlines, citing that the US President Trump’s administration plans to tax repatriation of corporative foreign earnings at 10%. The USD index moved-off multi-month troughs of 99.57 and now trades muted around 99.68.

Looking ahead, amid a data-empty UK and US dockets, all eyes remain on the Trump administration’s announcement of the tax reform plans later on Wednesday, which will have a significant impact on the pair.

GBP/USD Levels to consider            

A break above 1.2842/ 51 (daily top/ Apr 20 high) could lift the pair above 1.2871 (Apr 24 high), beyond which a test of 1.2912 (flash rally high) is imminent. Conversely, a break below 1.2819 (5-DMA), leading to a subsequent break below 1.2763/58 (10-DMA/ Apr 21 low) is likely to drag the pair towards testing its next support near 1.2722/00 (classic S3/ zero figure).


03:36 USD/CNY fix projection: 6.8882 - Nomura

Analysts at Nomura offered their projections for today's USD/CNY fix.

Key Quotes:

"Our model1 projects the fix to be 49 pips higher than the previous fix (6.8882 from 6.8833) and 19 pips higher than the previous official spot USD/CNY close of 6.8863. The basket implied change is 22 pips higher than the previous official spot USD/CNY close (6.8885 from 6.8863)."


03:33 EUR/JPY: risk on continues in Tokyo, eyes now for 123.00

Currently, EUR/JPY is trading at 121.56, up 0.14% on the day, having posted a daily high at 121.70 and low at 121.27.

  • Market sentiment lifted overnight - ANZ

EUR/JPY remains better bid in Tokyo following a strong performance overnight for the euro. EUR/USD battered down the doors of the 1.09 handle after the cross rallied from 120.00 in London in a sell-off in the yen from 110.50's vs the greenback.  Risk sentiment continues to improve and the US stock market rallied forcing further bids in the cross and ceiling the deal for a test of the 11 handle in USD/JPY this Tokyo and to break the recent highs for the month in the cross.

EUR/JPY levels

EUR/JPY targets 123.00 in surpassing the Feb high of 122.87. to the downside, Analysts at Commerzbank expect, in the medium term, for the cross to still target the 112.62 October 2016 low and the 112.53 2012-2017 support line, which they look to hold and provoke reversal longer term, provided that no weekly close above the December high at 124.08 is made. "Longer term outlook is neutral to negative: The erosion of the 117.50/35 the 2016-2017 uptrend is negative and we look for losses to it's  112.53 5 year support line which is expected to hold and provoke a reversal."


03:28 USD/JPY jumps above 111.00 as the 10-year treasury yield trades at 2-week high

USD/JPY chewed through resistance at 110.62 (23.6% fib retracement of 118.66-108.13) in the North American session and rose to 111.24 in Asia as risk-on rally in the US pushed the 10-year yield to a 2-week high of 2.343%.

NASDAQ closes above 6,000 for the first time

There is no stopping the stock market bulls. Dow jumped 200 points and the NASDAQ closed above 6000 for the first time ever. S&P 500 is near its all time highs as well.

Big names like Caterpillar, DuPont, McDonald’s Corp topped the analysts' expectations, thus adding fuel to the ‘macron rally’. This reduced the demand for the safe haven treasuries and pushed the 10-year yield above the critical technical resistance of 2.31%.

The Dollar-Yen followed suit and remains well bid in Asia around 111.20 levels. The 10-year yield currently trades around 2.34%. The rally in the risk assets looks set to continue with Trump expected to unveil the outline of the tax plan later today, which will include a cut in corporate tax from 30% to 15%.

Bullish outside day candle

The daily chart of the USD/JPY pair shows a bullish outside day candle, a pattern that suggests continuation of the rally.

USD/JPY Technical Levels

A break above 111.58 (Apr 10 high) would expose stiff resistance at 111.60 (Feb low). A violation there could see the spot test supply around 112.15 (38.2% fib of 118.66-108.13).

On the downside, support is seen at 110.62 (23.6% fib of 118.66-108.13) and 110.09 (Apr 7 low). Only a daily close below 109.59 (previous day’s low) would signal bullish invalidation.

 


03:16 US Comm Sec Ross: Trump administration mulls more trade actions - WSJ

The US Commerce Secretary Wilbur Ross said in a WSJ interview late-Tuesday that The Trump administration is considering launching trade actions to protect the US aluminum, semiconductor and shipbuilding industries, while at the same time ramping up free-trade talks with the European Union, Japan and the UK.

Key Quotes:

“Having a nuclear-power capability is obviously a matter of national security”

“So is the treatment of nuclear waste, which is another activity of Westinghouse. And so is the maintenance of nuclear facilities”

“We never canceled TTIP. We sort of suspended the negotiations, but we never canceled. It wasn’t like TPP”


03:07 Canadas PM Trudeau tells Trump that Canada will vigorously defend interests of softwood lumber industry

Reuters reporting statement from the Canadian PM Trudeau’s office, directed to the US President Trump, in the wake of yesterday’s reports that the Trump administration plans to impose 20% tariffs on soft lumber imports from Canada.

Key Headlines:

"Refuted the baseless allegations" of US commerce department on lumber

Tells Trump that Canada will vigorously defend interests of softwood lumber industry

Canadian PM, Trump agree on the importance of reaching a negotiated agreement on softwood lumber

Tells Trump canada will stick to NAFTA rules givingUS access to duty-free and quota-free access for milk protein substances


03:01 When is Aussie CPI and how might it affect AUD/USD?

Australian CPI overview

The Australian Q1 CPI report is scheduled for release tomorrow at 0130GMT. This report is a major event for the Aussie and related markets as a key contributing factor to the RBA's monetary policy decisions. 

"Westpac’s forecast is 0.6%qtr (same as consensus) lifting the annual pace to 2.3%yr from 1.5%yr. March is a seasonally softer quarter with the ABS seasonal factors boosting our seasonally adjusted estimate to 0.8%qtr. The core measures (trimmed mean, weighted median) are expected to be 0.1ppt lower," explained analysts at Westpac.

Essentially, the market expects that underlying inflation is likely to remain weak and below the RBA's target band while ongoing labour market softness will keep wages inflation contained. At the same time, the price of the Aussie will be keeping imported goods and services low.

How could CPI affect AUD/USD today?

AUD/USD has been consolidating at the mid point between the 12th April rally from 0.7470 to 0.7610 resistance and 17th April highs. The recent sell-off to 0.7520 from the April 19th's bullish correction to 0.7583 could gather momentum to the downside should the data come in below expectations, firming up the view that the RBA remains on hold for the remainder of 2017 and into early 2018, widening the divergence between the Fed and RBA even further. A break below 0.7520 targets 0.7505 and then 0.7490 ahead of 0.7470 and April lows. If the data comes in as expected or higher, the next 0.7560 and 0.7580. 0.7610 being the ultimate target on a strong risk-on rally. 

Key notes:

"Potential government policies to tackle house price growth could impact rental growth going forward in both directions," explained analysts at NAB.

Australia's Q1 2017 CPI preview - NAB

About Australia CPI

The Consumer Price Index released by the RBA and republished by the Australian Bureau of Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The trimmed mean is calculated as the weighted mean of the central 70% of the quarterly price change distribution of all CPI components, with the annual rates based on compounded quarterly calculations.

 


02:39 Market sentiment lifted overnight - ANZ

Analysts at ANZ noted the that the market sentiment has lifted following the first round of the French election, with positive US company earnings and solid data also helping. 

Key Quotes:

"The EUR and asset markets have pushed higher, with the slight underperformance in the vote for National Front candidate Marine Le Pen (21.5%) boosting confidence that the anti-EU vote is not gaining sufficient traction to cause an upset in the second round of voting on May 7. That potentially may have implications for the anti-EU vote in other member states. Macron is expected to win 60-63% of the second round vote.

Overnight positive earnings from large multinationals lifted US equities, helping the MSCI All-Country Index and Nasdaq both push to all-time highs. US treasuries rose 4-6bps across the curve. The US 2 year auction drew strong demand with bid- to-cover at the highest level since May 2016. In Europe the curve bear steepened, with 30 year yields up 5 to 9 bps. Commodity prices headed higher driven by softs and oil. Gold prices declined as risk sentiment improved."


02:19 Trump s administration plans to tax repatriation of corporative foreignearnings at 10%

According to Livesquawk, U.S. President Donald Trump's administration plans to tax repatriation of corporative foreign earnings at 10%.


01:47 New Zealand Visitor Arrivals (YoY) dipped from previous 1.8%to -0.2% in March


01:41 AUD/NZD: headed to 1.09 and then 1.1000 - Westpac

Analysts at Westpac offered an outlook for AUD/NZD and rates.

Key Quotes:

"AUD/NZD 1 day: Higher towards 1.0900 multi-day, global risk-aversion fading (AUD is more sensitive).

AUD/NZD 1-3 month: Higher to 1.10. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment, although is closing the gap (6 Mar).

AU swap yields 1 day: The 3yr should open at around 2.02% or higher, the 10yr around 2.89% or higher.

AU swap yields 1-3 month: Our RBA outlook is anchoring front end valuations. We expect 3yr swap rates to remain in a 2% to 2.3% range. (31 Mar)

NZ swap yields 1 day: NZ 2yr swap rates should open up 1bp at 2.34%, the 10yr up 3bp at 3.41%.

NZ swap yields 1-3 month: The RBNZ said it has ended its easing cycle and will remain on hold until 2020. That will anchor the short end, although markets will not abandon their expectations for earlier tightening which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (17 Feb)"


01:19 US data flooding in - ANZ

Analysts at ANZ explained that the US data today showed some signs of moderation overnight, although outright levels remain elevated suggesting the economy continues to expand at a moderate pace. 

Key Quotes:

"April consumer confidence dipped to 120.3, with both the present situations and expectations indices falling. The fall only partly reversed the surge in March, with the headline index still close to a 16-year high. The details point to a strong labour market with respondents saying that jobs are plentiful rather than hard to find remaining close to a 16-year high (11.7 vs last 12.8). Inflation expectations remained stable at 4.7%. 

Elsewhere, new home sales were at 621k on an annualised basis, from 584k the previous month. The housing market continues to signal healthy overall economic conditions as demand remains strong despite reduced affordability due to higher interest rates and prices. 

Finally, the Richmond Fed manufacturing index was at 20 (mkt: 16; last: 22). The number of employees dropped to 5, from 20, while the work week fell to 8, from 21, driving the moderation in the business assessment. Additionally, shipments rose to 25, from 17; new orders remained at 26; and wages were steady at 21. Earlier in the week, the April Dallas Fed manufacturing activity index held up well at 16.8. The new orders rose sub-index to 11.5 (9.5) and the number of employees was stable at 8.5 (8.4).

In Germany, the April IFO index rose to 112.9. That was the third consecutive rise and fits with other evidence of decent momentum in economic activity. 

Euro area government debt fell to 89.2% of GDP in 2016 vs 90.3% in 2015 and is down from a post crisis high of 92% in 2014. The Euro area ran a budget deficit of 1.5% of GDP last year. The fiscal picture overall for the region is improving, but there is still slippage in the budget deficits of France (3.4% of GDP) and Spain (4.5%), which need to be addressed."


01:15 NZD/USD: how much further is there to the downside?

Currently, NZD/USD is trading at 0.6947, down -0.04% on the day, having posted a daily high at 0.6955 and low at 0.6947.

NZD/USD has been chipping away at the mid point of the 0.69 handle but the dollar has been unable to gain traction across the board due to the euro rallying and slowing up the bear's momentum. Analysts at Westpac noted that NZD/USD has been capped at 0.7055 and probably heading towards 0.6900 multi-day, the US’ trade protection policies. dominating elevated global risk sentiment.

  • Market wrap: dollar down on European currency advances - Westpac

NZD/USD 1-3 month:  

The same analysts explained the NZD/USD has the potential for higher to the 0.7100-0.7200 area during the month ahead, as USD longs are pared. "Further out, the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down towards 0.6900. The RBNZ’s persistent reminders it is on hold for a long time should also weigh."

NZD/USD levels

The 20th April rally to 0.7050 was broken yesterday along with the 200 ema on the hourly sticks and the 0.7000 psychological level. NZD/USD has moved towards the next critical level at 0.6933/50. A break of the 0.69 handle opens up the 0.6885 mark as being the recent lows guarding 0.6675 as the 29th May 2016 high on a break of the 0.67 handle. On the flip side, a run back to the previous aforementioned consolidation area, bulls have the 17th April highs of 0.7035 is sight protecting 0.7060/70 and recent high today around the 200-d ema (0.7067). There is a double bottom at 0.7130 as the mid-Feb lows.


00:47 Market wrap: dollar down on european currency advances - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: Risk-seeking accelerated yesterday, pushing some equity indices (e.g. NASDAQ, MSCI World) to record highs, and bond yields higher. Revised expectations regarding US reforms and fading geopolitical risks were among the catalysts.

Interest rates: US 10yr treasury yields rose from 2.26% to 2.34%, 2yr yields from 1.23% to 1.28%.. Fed fund futures yields rose, now pricing a June rate hike as an 80% chance (60% on Mon).

Key drivers at present include expectations of Trump’s tax reform announcement tonight, as well as risks of a US Government shutdown as the spending plan deadline on 28 Aprillooms.

Currencies: The US dollar index is down 0.3%, mainly due to outperformances by the European currencies. EUR rose from 1.0860 to 1.0950 – the highest since mid-November – helped by a Reuters story from unnamed ECB sources that it may tweak its policy guidance slightly in a hawkish direction at its June meeting. Continued relief regarding the French election result was probably also at play. USD/CAD rose from 1.3550 to 1.3626 – the highest since Feb 2016 – after the US Administration imposed tariffs on Canadian lumber imports. USD/JPY rose from 109.60 to 111.19, the safe-haven yen the worst performer on the day. AUD fell from 0.7570 to 0.7521, probably affected by the US trade protection move. NZD did even worse for the same reasons, falling from 0.7015 to 0.6941. AUD/NZD extended its multi-day rally to 1.0854."


00:06 US Dollar stays calm near five-month low, at 99.70

The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, has been spending the last couple of hours in a very tight range around 99.70 as the day's sharp sell-off is taking a break after pushing the index to a new five-month low at 98.57. As of writing, the index was at 98.68, down 0.24% on the day.

Today's uninspiring macro data from the U.S. hurt the demand for the greenback during the American session, as the consumer confidence dropped in April. On the other hand, positive numbers from the housing sector were largely ignored.

The investors will be keeping a close eye on tomorrow's announcement, which will reveal the details of the tax reform in the United States. A positive reaction from the stock markets should increase the risk appetite, pushing the U.S. Treasury yields higher and possibly helping the US Dollar Index correct some of its recent losses. However, the usual correlation between the bond yields and the DXY hasn't been effective since the week started as the markets remained focused on the European currencies.

  • U.S. President Trump reportedly to proposing to slash the tax rate on pass-through companies to 15% - WSJ
  • U.S. President Trump's administration drops support for border adjustment tax - NYT

Technical outlook

A break below 98.30 (Nov. 10 low) could open the door towards 98 (psychological level) and 97.60 (Nov. 1 low). On the upside, the immediate resistance is located at 99 (psychological level) ahead of 99.75 (Mar. 23 low) and 100 (psychological level).


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Data source: FX Street
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