ANZ Morning Focus: FXWW

From the FXWW Chatroom – O/night NZDUSD 6726/6772 NZDAUD 9116/9135
Today NZDUSD 6720/6780 NZDAUD 9110/9150
· NZD suffered early London testing below 6730 on broad USD strength with the NZDAUD sidelined in the low 91s
· Still, we managed to recover throughout the overnight session with traders reporting little interest, to close the session unchanged
· This week we still see downside risks to NZD but are mindful of positioning. NZ CPI the main event
· Equities played ball for investors with a good performance S&P +0.11%, Dow +0.38% closing the week on a positive
· Earnings season kicks off this week which could well keep us calm – plenty of positive ‘surprises’ expected
· But we’ll still focus on Capex outlooks for individual US names as a barometer of the trump-trade-era mood
· US 10yr closed the week around 2.83 with at least one Fed speaker touching on curve inversion
· Trump meets Putin early this week in Helsinki.. watch for headlines
· U of Mich dipped with trade war fears denting expectations with 43% of people citing tariffs as something to watch
· US import prices and consumer inflation also dipped.
· Fed’s Bostic does not have concerns other than the self-fulfilling prophecy of an inverted curve.
· Fed’s Kaplan – what’s going on in the short term certainly isn’t positive but doesn’t change the outlook
· But clearly the Fed is worried about risk and their curve – as we all are…
· Semi Annual Mon Pol report was released by the Fed with little fanfare – it will be presented this week by Powell on Tuesday night
· Also early this week for UK watchers, we get the start of Brexit negotiations around May’s proposal on Monday (night).
· Expect headlines with Barnier giving a press conference on the 20th (end of the week).
· NZ CPI the main local event this week out on Tuesday morning. ANZ forecast is 0.1% with mkt at 0.5%. Big risks.
· Our much weaker print is a consequence of the weak non-tradable input from the ANZ Monthly Inflation Gauge.
Our currency view remains the same – plenty of ‘risks’ around at the moment, NZ economy slowing, weaker CPI expected from ANZ – all reasons to remain cautious on NZD with a short bias. However vs Aus it’s a different story with a mixed view on the desk. Key remains neckline support around 9100 and if the market mirrors our desk in terms of levels, there’ll be plenty of buyers on this dip looking for a bounce back to 9300 as stretched positioning is trimmed.
As well as NZ CPI we get China Q2 GDP, Retail Sales and IP which are likely to show that China continues to decelerate (today NZT). In Aus there’s RBA minutes tomorrow and the labour lottery on Thursday. UK sees more action with wage data, inflation and retail sales. And of course Brexit. In the US we’ll watch Retail Sales and IP as well as speakers and the semi-annual mon policy report will be presented to Congress by Powell (where we’re interested in the Q&A…
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