NZD: NZD/USD - Extends Above 0.5650, Trying To From A Short-Term Base
The NZD/USD had a range overnight of 0.5632 - 0.5669, Asia is trading around 0.5655. Risk consolidated its recent gains and the markets saw more breadth, the USD moved lower in response to a weaker ADP jobs report. The NZD reacted higher to the move in the USD and is attempting to put in a short-term low. The NZD does stand out as a vehicle to express a short in but should this bout of improved risk sentiment grow it will be tough for the NZD to ignore it and it could play catch up to the move at some point, if you feel this bounce in risk will fail and move back lower then the NZD remains a great way to express that. I still suspect any decent bounce will again attract sellers though. The first sell area on a pullback would be around 0.5750 and then the more pivotal 0.5850 area. Dips on the day toward 0.5630-40 needs to hold for the retracement to potentially extend.
- Bloomberg reports that, “First-Time Buyers Snap Up New Zealand Property After Price Slide. People signing up to buy their first property in New Zealand made up a record 27.7% of all transactions in the third quarter, according to the Cotality-Westpac NZ First Home Buyer Report.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5600(NZD538m), 0.5800(NZD461m). Upcoming Close Strikes : 0.5380(NZD460m Nov 13) - BBG
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUD: AUD/USD - Gaps Higher On The Open As Tone Turns More Conciliatory
The AUD/USD had a range Friday night of 0.6473-0.6566, Asia is trading around 0.6510(+0.55%). Some clarification from China over the weekend on their new rare earth export controls has seen the US walk back its aggressive stance and a more conciliatory tone is being set. I suspect a lot of Friday's moves will see some decent pullbacks on this, but how long it lasts is anybody's guess. The AUD has gapped higher on the open but looking at the way Crypto has bounced on the walk back would suggest this could potentially have more to do. A lot of leverage would have been taken out last week and it's very hard to just regain the conviction it previously had so I suspect the rally will stall at some point as some risk is pared back. For this reason I suspect any bounce back towards 0.6570/0.6600 will be faded again first up if seen.
- JD Vance made an effort to reduce the temperature of the situation with his remarks: "We appreciate the friendship between President Trump and President Xi, President Trump hopes the U.S. won’t need to use ‘leverage’ on China, President Trump is willing to be a reasonable negotiator with China.” - H/T @FirstSquawk
- MNI Interviewed Peter Tulip last week, a former senior researcher at the RBA: RBA TO Hold Rates For Some Time. He noted recent employment growth volatility was typical of monthly data, noting the unemployment rate had largely remained steady. “Basically at this point I think the RBA should and will hold rates steady for a while,” he said.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AD403m), 0.6555(AUD529m). Upcoming Close Strikes : 0.6500(AUD1.01b Oct 14), 0.6600(AUD948m Oct 14), 0.6650(AUD880m Oct 14) - BBG
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
ASIA: Coming Up In Monday Asia Pac Markets
| 2230BST | 0530HKT | 0830AEDT | New Zealand Sep Performance Services Index |
| 2245BST | 0545HKT | 0845AEDT | New Zealand Aug Net Migration |
| 0100BST | 0800HKT | 1100AEDT | South Korea Oct First 10days Trade |
| China Sep Trade Data |
Source: Bloomberg Finance L.P./MNI
NEW ZEALAND: September Monthly Prices & Card Spending Focus Of Week
After the RBNZ’s outsized 50bp OCR cut on 8 October, the outlook for the 26 November meeting will be highly data dependent. This week September card spending and monthly price data are released and as they round off the quarter should give an indication of how Q3 consumption and inflation developed.
- Monday sees the September performance of services index which has consistently printed below the breakeven 50-level for around two years.
- August net migration is released Monday. As the labour market has deteriorated, net inward migration has moderated.
- September card spending is on Tuesday. The retail component has been gradually recovering since Q2 and annual growth picked up to 1.7% y/y in August from 1.2%. The RBNZ said this month that lower rates appear to be supporting consumption and as mortgages rollover onto lower rates it should improve further.
- The monthly price series for September print on Thursday ahead of Q3 CPI on 20 October. Food inflation stabilized at 5.0% y/y in August with rents rising 2.1% y/y down from 2.3% but electricity rose 11.4% y/y up from 11.0%. Petrol prices continued to contract.
- RBNZ Chief Economist Conway speaks on Wednesday at 1145 NZDT on the lessons from monetary and fiscal policy during COVID-19. So it appears his comments will be more backward looking rather than examining the policy outlook.
