NZD: Asia Wrap - Can't Ignore The USD Strength
The NZD/USD had a range of 0.5925 - 0.5977 in the Asia-Pac session, going into the London open trading around 0.5940. The NZD has fallen pretty hard in our session as it seems to be catching up to the general USD move. It seemed to brush off the USD strength overnight but the extension this morning looked like risk moving higher was a bridge too far.
- NEW ZEALAND Data: Soft Economy But Outlook Improved Later In May. ANZ business confidence fell to 36.6 in May from 49.3, the lowest since July, while the outlook moderated to 34.8 from 47.7.
- RBNZ Governor Hawkesby spoke with Bloomberg today and reiterated that the message at yesterday's press conference was not to assume that a July rate cut is programmed into the MPC's thinking.
- Elevated uncertainty means that there could be many different paths from here, which is why the central bank presented different scenarios in its May Monetary Policy Statement.
- The NZD continues to trade in a 0.5850/0.6050 range, the hawkish slant from the RBNZ probably saw a portion of the new shorts added last week by leveraged accounts pared back overnight.
- The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. A break above 0.6050 is needed to provide the spark for the next leg higher.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5975(NZD440m). Upcoming Close Strikes : 0.6100(NZD375m June 3)
AUD/NZD range for the session has been 1.0764 - 1.0821, currently trading 1.0815. NZD looks to have played catch up in Asia this morning. A top looks to have been put in place now just above 1.0900, the market will have been looking for a more dovish tone from the RBNZ yesterday and AUD/NZD should now see supply on bounces. The first target is around 1.0650.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
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CNH: USD/CNH Tests Sub 7.2700, Outperforms Firmer USD Index Levels
USD/CNH sits a touch up from session lows. We were last near 7.2740, against earlier lows of 7.2692. Still, CNH is up close to 0.15%, while onshore spot has risen close to 0.20% and tracks near similar levels to USD/CNH. This is outperforming the stronger USD trend against the majors so far today. The BBDXY index is up around 0.20%.
- For USD/CNH technicals we are close to the 100-day EMA, while further south is the 200-day at 7.2535.
- BBG reported that a survey of exporters pointed to a greater conversion of earnings back into local currency (see this link). Also note that the holiday period kicks off this Thursday and runs through to next Monday (the Labor day holiday period). Such flows may also be more prominent near end April as well.
- In the cross asset space, equity sentiment is very steady, the CSI 300 remaining sub 3800 at this stage.
- Tomorrow, we get the PMI prints, with market expectations skewed towards weaker prints.
CANADA: NDP Leader Singh Poised To Lose Own Seat And Party Status In House
- New Democratic Party Leader Jagmeet Singh is running in third place in his own riding according to Elections Canada data as of 12:35am EST Tuesday.
- Data shows Singh with about 4K votes, Conservative candidate with 8.4K and Liberal Wade Chang with 9.3K votes, with 48% of polls reporting.
- NDP reduced to seven seats in preliminary polling, short of what's needed to be an official party in the House of Commons.
