AUDNZD: AUD/NZD Pushing Higher
Whilst AUD and NZD have been volatile against the USD today, relative data outcomes continue to point in AUD's favour.
- To recap, Q1 NZ GDP was much weaker than expected, dipping 0.2%, versus market forecasts of a 0.6% rise. We noted that the detail wasn't as bad as the headline suggested, but it does continue to point to relative economic momentum in AUD's favour.
- This point was reinforced by the better than expected AU jobs data. Total jobs growth was much higher than expected (60.6k v 25k forecast) and concentrated in full-time gains. The unemployment rate was unchanged at 3.9% relative to a 3.8% dip expected, although this owes to higher participation rates.
- Not surprisingly, relative AU-NZ yield differentials are trending higher. The 10yr spread is almost back in positive territory, see the chart below.
- This points to further upside in the cross rate. We aren't too far away from earlier June highs above 1.1170.
Fig 1: Relative Data Outcomes Pushing the AU-NZ Spreads Higher
Source: MNI - Market News/Bloomberg
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KRW: Won Leads Gains In Asia Amid Greenback Weakness
Spot USD/KRW changes hands -5.95 figs at KRW1,278.20 as greenback weakness persists in the wake of Monday's sales. Bears look for a retreat under Apr 29 low of KRW1,255.25 before targeting the 50-DMA at KRW1,239.80. Bulls need a clearance of May 12 high of KRW1,291.45 before taking aim at Mar 19, 2020 high of KRW1,296.75.
- USD/KRW 1-month NDF last -2.19 figs at KRW1,278.65. Bears look to a fall through May 4 low of KRW1,250.96, while bulls keep an eye on May 12 high of KRW1,292.69.
- North Korea reported a continued surge in "fever" cases today but it is unclear how many of those are COVID-19 infections owing to the nation's limited testing capacity. Kim Jong-un has instructed the military to assist in medicine supplies, but the country lacks resources to mount any significant public health defence against the virus. Seoul said that North Korea has been "unresponsive" to its offers of cooperation on COVID-19 response.
- Reminder that U.S. President Biden will touch down in the South Korean capital on Friday. Yonhap sources suggested that the POTUS could visit the Demilitarised Zone that separates the two Koreas.
- South Korea's PPI data will be released on Friday, providing the only point of note on the data front during the remainder of this week.
CROSS ASSET: Risk-Positive Flows Extend A Little
The latest round of Chinese property easing measures (the city of Hangzhou loosened requirements for second homes purchases) and confirmation that Hong Kong will press ahead with its planned easing of COVID-related curbs seems to be allowing the earlier risk-positive flows (which surrounded the COVID situation in Shanghai) to extend. That leaves e-minis 0.3-0.7% higher, while the Hang Seng leads gains in the Asia-Pac equity space (adding over 1.5% early on). U.S. Tsys are still 1-2bp cheaper on the day. FX trade sees the AUD atop the G10 FX table, while the JPY finds itself at the other end of the rankings.
AUD: AUD/USD Back Above 0.7000
AUD/USD has continued to push higher, up 0.50% and breaching the 0.7000 handle. Firmer risk appetite appears to be the main driver, with the RBA minutes not shifting local rates/bonds a great deal.
- The A$ is the top performer within the G10 FX space so far today, with NZD the next best performer at +0.30%. JPY is underperforming, as risk appetite improves. AUD/JPY is back to 90.60.
- US equity futures are higher to the tune of 0.3-0.7%, while Asian equities are also generally on the front foot. Hong Kong tech stocks leading the way at +3% at this stage.
- Yield spreads with the USD basically unchanged. Iron ore is holding steady around $130/tonne.
- Focus now if we can test above 0.7050 on improved risk appetite and weaker USD sentiment.
