By Phil Lynch
It was a good 24 hours for the antipodean currencies, with both the NZD and AUD performing well in markets. It was a notable performance given commodity prices were softer (oil down 1.2%), and that the USD also did well (just not against the Kiwi or Aussie).
Notably, the NZDGBP was up 1.2%, the NZDJPY up 1.1%, and the NZDEUR up 0.8%.
The NZDUSD would likely have been even higher this morning, if it weren’t for US October Consumer Confidence data coming in at 137.9 overnight, beating the 136.0 that had been forecast by economists. This confidence further reflects the strength in the US economy and follows on nicely from the respectable 3.5% GDP growth number which was published over the weekend.
At 1:00 PM today, the ANZ are releasing their Business Confidence Survey. This report has had a significant impact on the New Zealand dollar of late, which in my opinion has been unwarranted. Today, the Business Confidence levels have an opportunity to rebound from the -38.3% reading in September.
It is hard to see these numbers moving much lower. The readings are often tied in with local politics, with the business community being friendlier to the National Party. Recently, however, the National Party has been hit with their own issues, whilst Prime Minister Jacinda Ardern has been working hard to develop stronger ties with the business community. A strong rebound in the confidence numbers could be worth a 30-50 pip rise – but this is merely the author’s opinion.
The largest mover overnight was the NZDGBP up 1.2%. This was in part thanks to a report from Standard & Poors who warned a ‘no-deal’ Brexit would likely tip the UK into a long recession. Further to this, Prime Minister May ruled out a second referendum on Brexit. The risks for the UK are very real – and the S&P report, in particular, was a timely reminder for markets of how bad things might get for the British economy.
At 1:30 PM today, Australian CPI numbers are released to the market. Analysts are expecting inflation to be sitting at 1.9% for the third quarter (annualised). Currently, the RBA is firmly on hold at 1.50%, and analysts don’t expect a rise until Q4 2019. A strong inflation reading today could tip the balance and bring this forward.
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