May 11, 2016

Markets Today: Kiwi

The US Energy Information Agency revised up its forecasts for oil prices for this year and next, lifting its forecast for WTI for this year by nearly $6/bbl to $40.32 from $34.37.

The commodity currencies have been the better performers overnight on the back of a move back up in world oil prices.  WTI is up 2.33% to $44.46 (+$1.02), while Brent fared a little better, up 4.08% to $45.41, a rise of $1.77.  It’s still been a night of relatively contained currency moves among the majors (and including the commodity group), the AUD has been a better performer, currently trading at 0.7380/85, toward the top of its overnight range, up nearly 1%, lifted just now by a NZD bid tone.  The US Energy Information Agency revised up its forecasts for oil prices for this year and next, lifting its forecast for WTI for this year by nearly $6/bbl to $40.32 from $34.37.

A modest $0.27 (+0.49%) increase in the spot price of the Qingdao cif 62% benchmark iron ore fines price to $55.26/t, a 0.52% rise in Dalian iron ore futures and a 1.65% rise in Chinese steel rebar futures might also have added a measure of support to the AUD, as might have increases in equity markets on both sides of the Atlantic; LME copper futures eased 0.13%.

The NZD initially made a slimmer gain, up earlier by 0.33%, while the CAD and the NOK have played to a similar thematic, the CAD up 0.40% and the NOK up 0.24%.  The NZD though has just caught a bid tone to above 0.68 in immediate reaction to the release of the RBNZ Financial Stability Report noting renewed Auckland house price concerns (more on this below).

As Eurozone finance ministers and the IMF assess Greece’s progress with fiscal reform to access more funds, German Finance Minister Schaeuble warned not to expect a debt haircut to be part of a Greece deal.  Germany’s industrial production for March underwhelmed expectations, and were of not market consequence in the light of yesterday’s stronger factory orders and higher exports in March reported overnight, driving up its trade surplus.

Speaking at an international monetary forum in Zurich, NY Fed President Bill Dudley spoke about the USD and not directly about the economy and monetary policy.  Even his comments on the USD were more referencing that its reserve currency status can push its value out of line and that FX volatility might be reduced with more reserve currencies.  US data was second tier but the wholesale inventories/sales report did lead to a modest upward Atlanta Fed’s GDPNow estimate for Q2 from 1.7% to 2.2%.  The US NFIB Small Business Optimism Index for April and the JOLTs Job Openings report for March reflected a still positive tone in the US labour market, US small business reporting an increase in hiring plans and “positions not able to fill”, but no change in actual and planned compensation.

Just now/Coming up

There might be some further watching for the Kiwi this morning since the release just now of the RBNZ’s Financial Stability Report (FSR) There’s a press conference from RBNZ Governor Wheeler in just under two hours (9.00 AEST), with the opportunity to address issues such as the dairy industry, Auckland house prices (any suggestions of more macro-prudential measures), and more.  So far the NZD has picked up a mild bid tone, the FSR noting housing and dairy risks to financial stability and that the Bank will assess whether more macro-prudential might be need to address re-emerging Auckland house price pressures.

Australia has the monthly Westpac-MI Consumer Sentiment index at 10.30.  Yesterday’s weekly measure showed no change on week; a small rise from this week last month.  For Housing finance at 11.30, NAB looks for a somewhat-below-consensus 0.8% dip in the headline number of owner-occupied approvals, the consensus at -1.5%.

Tonight, there’s the possibility of GBP sound bites with Chancellor Osborne being questioned on Brexit by the UK Parliamentary Treasury Committee.  The ECB’s Nowotny is speaking in Vienna.  No US data to speak of.


On global stock markets, the S&P 500 was +1.20%. Bond markets saw US 10-years +1.06bp to 1.76%. On commodity markets, Brent crude oil +4.31% to $45.51, gold-0.1% to $1,265, iron ore +0.5% to $55.26. AUD is at 0.7372 and the range was 0.7362 to 0.7382.

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