• Michael Moran , Senior Currency Strategist at ACY Securities


• 06.07.2021 07:30 am
trading

Kiwi Jumps – ASB Bank Sees RBNZ Rate Hike in Late 2021

Summary: New Zealand’s Kiwi sprouted wings and soared in early Sydney trade after ASB Bank (Auckland Savings Bank) predicted the RBNZ will raise the cash rate in November 2021. NZD/USD currently trades at 0.7058 from its 0.7017 New York close. The Australian Dollar climbed to 0.7545 from 0.7530 ahead of today’s RBA Interest rate meeting and decision (2.30 pm Sydney). Meantime the US Dollar was little changed against its other Rivals as the US celebrated their Independence Day holiday. Despite mostly upbeat European and Eurozone Services and Composite PMIs, the EUR/USD pair was little changed, trading at 1.1866 from its New York close of 1.1863. Sterling edged up to 1.3857 from 1.3845 on an improvement of UK Services PMI in June (to 62.4 vs estimates of 61.7). UK Prime Minister Boris Johnson lifted partial restrictions as the country prepared for its scheduled July 19 reopening. Against the Asian and Emerging Market currencies, the Greenback was mixed. USD/SGD opened at 1.3450 from 1.3460 yesterday while the USD/THB pair settled at 32.10 (32.15 yesterday).
Wall Street stocks finished slightly higher in limited trade while US Treasury markets were closed.
The DOW closed at 34,825 (34,790) while the S&P 500 was last at 4,353 (4,350 yesterday). Commodity prices rose on generally upbeat risk appetite with Gold and Silver leading the way.
Data released yesterday saw Australia’s Retail Sales in May rise to 0.4%, beating forecasts at 0.1%. Australian Building Approvals fell by -7.1% against expectations of -5.0% drop. Eurozone June Services PMIs rose to 58.3 from 55.2 in May. UK Services PMI beat forecasts, rising to 62.4 from 61.7. The Eurozone Sentix Investor Confidence Index slipped to 29.8, missing estimates at 30.2.

• NZD/USD – was the biggest mover in morning trade, soaring to 0.7058 from 0.7017. The Kiwi had a relatively tight range offshore with a 0.7010-0.7034 range. ASB Bank, one of New Zealand’s big 4 banks, predicted that the RBNZ would hike rates in November. A few minutes ago, New Zealand’s NZIER Quarterly Business Confidence Index rose to 7 from the previous quarter’s -13.
• AUD/USD – Ahead of the RBA’s interest rate policy meeting and rate announcement, the Aussie Dollar climbed 25 pips to 0.7545 from its NY close at 0.7530. RBA Governor Philip Lowe will hold a press conference following the meeting. While the RBA is not expected to change its overnight cash rate, traders will be looking closely into the forward guidance.
• GBP/USD – Sterling edged higher from its New York close at 1.3843 to 1.3855 in early Asian trade. UK Services PMIs beat forecasts while UK Prime Minister Boris Johnson remained optimistic despite the increase in the latest delta variant of Covid 19 infections in the country.
• EUR/USD – The shared currency opened little changed in early Asia at 1.1865 (1.1863) despite mostly upbeat European (Italian, French, Spanish) and Eurozone Services PMIs. Only Germany’s Services PMI was lower than expectations (57.5 against 58.1). Today sees more German economic data releases.

On the Lookout: The RBA interest rate policy meeting is the day’s main risk event. The Australian central bank is not expected to change its Overnight Cash Rate. RBA Governor Philip Lowe will hold a press conference following the meeting and rate decision. Lowe’s speech will be closely monitored for any future guidance.
US markets are back from their Independence Day long weekend holiday.
Data released today kick off with Japanese Average Cash Earnings, May Household Spending (m/m f/c at -3.7% from 0.1%, y/y f/c 10.9% from 13.0% - ACY Finlogix). European economic data follow and they begin with German Factory Orders for May (f/c to rise to 1% from -0.2%), German June Construction PMI (previous was 44.5, no forecasts), French Construction PMI for June (previous was 51.1, no forecasts), Eurozone Construction PMI for June (previous was 50.3, no forecasts). The UK releases its Construction PMI for June (f/c 63.8 from 64.2 – ACY Finlogix). Eurozone Retail Sales for May follow (m/m f/c 4.4% from -3.1%, y/y f/c 8.2% from 23.9% - Finlogix). Germany releases its ZEW Economic Sentiment Index for July (f/c 75.2 from 79.8). The Eurozone ZEW Economic Sentiment Index for July follows (previous was 81.3, no forecasts). Finally, the US release their June Markit Final Services PMI (f/c 64.8 from 70.4) and ISM Non-Manufacturing PMI for June (f/c 6.3.5 from 64.0 – Finlogix).

Trading Perspective: A busy start to the week with the economic data releases on Construction and Non-Manufacturing PMIs as well as the RBA’s interest rate policy meeting. Ahead of Thursday’s release of the FOMC meeting minutes, we can expect more consolidation. That said, the Greenback may lose steam with the markets going into risk-on mode. This would favour the risky currencies like the Aussie, Kiwi and Canadian Dollar.

• AUD/USD – The Australian Dollar grinded higher following its dip to 0.7444 on Friday after the release of the US Payrolls report. Overnight the Aussie traded in a relatively tight 0.7509-0.7537 range before closing at 0.7525. In early Asia, the Aussie Battler edged up to 0.7545. The RBA is not expected to change its Overnight Cash Rate from a record low of 0.1% at the conclusion of its meeting today. However, traders and investors will be listening to Governor Philip Lowe as he holds his press conference to see what future guidance the RBA has in store. Immediate resistance is found at 0.7570 followed by 0.7600. Immediate support lies at 0.7510 followed by 0.7480. Look to trade a likely 0.7510-0.7560.
• EUR/USD – The shared currency traded in a lacklustre 1.1851-1.1880 range overnight. The Euro opened at 1.1865 from 1.1863 yesterday. Mostly upbeat European and Eurozone Services PMIs failed to lift the EUR/USD higher. Today sees the release of Eurozone and European Construction PMI’s as well as German and Eurozone ZEW Economic Sentiment Index’s. EUR/USD has immediate resistance at 1.1880 and 1.1910. Immediate support can be found at 1.1850 and 1.1820. Look for a likely range today of 1.1850-1.1900.
• USD/JPY – opened flat at 110.97 (111.00 yesterday). The Dollar traded in tight overnight range of 110.77-111.19. The Greenback has immediate resistance against the Yen at 111.20 (strong) followed by 111.50. Immediate support lies at 110.70 and 110.40. Look for consolidation in a likely range today of 110.80-111.30. As we prepare for the Olympic Games in Tokyo amid the rise in global cases of the delta strain of Covid-19, this currency pair may be heating up.
• GBP/USD – Sterling edged higher against the US Dollar finishing up 0.25% at 1.3843 (1.3830 yesterday). GBP/USD has immediate resistance at 1.3860 (overnight high traded was 1.3862). The next resistance level lies at 1.3900. Immediate support can be found at 1.3800 (overnight low 1.3802). The next support level lies at 1.3770. Look for the British Pound to grind higher in a likely trade between 1.3810 and 1.3880 today.

Happy Tuesday all.