FOREX: NZD Weakness Extends Following Particularly Soft Q2 GDP
Sep-18 08:52
- The lack of conviction on the FOMC about the rate path forward was a key theme of the September meeting’s release materials, as well as Chair Powell’s press conference. This prompted the USD’s bearish momentum to stall on Wednesday and aggressively reverse higher. This theme was also on display early Thursday, with the USD index briefly extending its recovery from fresh cycle lows to 1.15% before easing back to unchanged levels on the session.
- The New Zealand dollar is the standout in the G10 space, following a particular weak set of Q2 GDP data. The -0.6% annual read has weighed heavily on the Kiwi, currently down 1.05% against the dollar and testing back below 0.5900. The data trumped the weaker-than-expected Aug employment change figure out of Australia, which has notably seen AUDNZD rise above 1.12 for the first time since late 2022. The cross has extended to its next target of 1.1250 in recent trade, the 76.4% Fibonacci retracement of the 2022 price swing.
- USDJPY tracks 0.3% higher on Thursday, extending the strong bounce following the FOMC. Notably for the pair, yesterday is a hammer candle formation - a bullish reversal signal. If correct, it signals scope for a recovery, with pivot support now established at 145.49, Wednesday’s low.
- Strong performance for equities has supported a significant move higher for EURJPY, breaking above key resistance at 173.97 and rising to a high of 174.31. The break higher opens 174.86, a Fibonacci projection, and 175.43, the Jul 11 ‘24 high and a key medium-term resistance.
- Support for the single currency has seen EURUSD bounce around 50 pips from the overnight 1.1781 lows. As a reminder, spot traded at fresh multi-year highs following the fed decision, printing 1.1919 and trading to within 4 pips of touted resistance. Support to watch is the 50-day EMA, at 1.1659.
- The September Bank of England decision headlines Thursday’s event risk, while the August US leading index, September Philly Fed and jobless claims data are all scheduled.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
SECURITY: 'Coalition Of The Willing' To Hold Call After White House Talks
Aug-19 08:46
The 'coalition of the willing' group, formed by countries that have committed to 'boots on the ground' in Ukraine in the event of a ceasefire/peace deal, will hold a national leaders videoconference at 06:00ET/11:00BST/12:00CET. The call will allow those leaders present at the White House talks on 18 August to brief the other leaders on the situation vis-a-vis US security guarantees, a trilateral meeting, and other key outcomes from the talks.
- The most important outcome of the talks from the perspective of Ukraine and its European allies will be the pledge from US President Donald Trump on security guarantees for Kyiv. Trump instructed Secretary of State Marco Rubio to begin work on establishing what these will look like. They could range from US boots on the ground (the best outcome for Ukraine, but the least likely), to aerial and/or maritime patrols, to providing intelligence and logistical support for Ukraine and its allies.
- For the 'coalition of the willing' countries, there remains significant trepidation as to the prospect of a workable peace deal that works in Ukraine's interest. Both German Chancellor Friedrich Merz and French President Emmanuel Macron voiced backing for a ceasefire before Russian President Vladimir Putin meets with Ukraine's Volodymyr Zelenskyy (which could take place in two weeks).
- Following the 'coalition of the willing' call, the European Council will hold an extraordinary leaders' summit on the same topic. Set to take place at 07:00ET/12:00BST/13:00CET.
BONDS: US and Gilt Roll Pace
Aug-19 08:42
- We would expect for the US Treasury and Gilt Roll to start picking up into Friday ahead of the First notice next Week, but as noted last Week with Powell on Friday, some Desks might be tempted to start Rolling some Positions earlier.
- A third of the front Month Volume in Gilt is now spread related, done straight and on legs.
PACE:
- WNA: 2%.
- USA: 3%.
- UXA: 1%.
- TYA: 5%.
- FVA: 5%.
- TUA: 3%.
- Gilt: 4% (as off Yesterday).
EGB OPTIONS: Bund outright Call Buyer
Aug-19 08:27
RXX5 132c, bought for 15 in 1.2k.
