NEWS / Foreign Exchange

AUD range-bound in a quiet day

NZD touches 0.7200 for first time in 16 months

Most major currencies traded quietly on Tuesday and the NZD was no different sticking to a 22 point range during local time. Overnight saw the NZD continue its march north following the NZ Q1 consumer confidence number. The number was slightly weaker than Q4 2006 but remained higher than 12-months ago. The resilience in consumers??™ confidence adds pressure to the RBNZ to hike interest rates further. The NZD had a sortie up to 0.7204 before retreating to 0.7170 this morning.

AUD range-bound in a quiet day

The AUD traded in tight ranges for the whole of Tuesday with no data to provide direction. AUD/USD has rumbled higher in recent weeks but lost plenty of momentum yesterday and will need inspiration from offshore due to the quiet domestic data week. The local trading range was 0.8083 to 0.8109; the loss of momentum forced the AUD slightly lower during offshore trading and drifted from 0.8098 to 0.8066. We open at 0.8080 this morning.

Little data to excite majors

It was another quiet day for the majors yesterday with little in the way of data for the market to get excited about. EUR/USD traded a tight 17 point range and USD/JPY found itself capped just below 118.40 with plenty of sellers noted around the 118.50 level. GBP/USD opened just shy of 1.9700 and slowly trickled off during the local session to find initial support at 1.9670. Offshore trading saw Sterling weaken on the release of headlines from a BoE committee meeting. The market interpreted the comments as dovish in nature and the currency fell to an intraday low of 1.9620. However GBP/USD soon recovered as a softer than expected US consumer confidence number dented the USD.

Japanese corporate services prices rose 0.4%yr in Feb. That reflects a 0.2% rise in the month, and compares to a 0.6%yr pace in January. The traded/non-traded dichotomy continued, with our favoured proxies underlining the status quo. On the discretionary non-traded side, advertising prices are down 0.8% on a year ago, while in the traded sector, ocean freight prices remain elevated.

US house prices fell 0.2% over the year to January, according to the S&P/Case-Shiller home price index. The index measures the price of homes in 20 US metropolitan areas, 11 of which showed a decline in the past 12 months. The decrease was the first since the group started keeping year-on-year records in January 2001 and was a touch weaker than the flat result forecast.

US consumer confidence fell in March. The conference board??™s index slipped to 107.2 from a (downwardly revised) five-year high of 111.2 in Feb. The result was close to our 107.5 forecast, although weaker than market expectations of 108.5. Rising gasoline prices, wobbles in equity markets and concerns over the housing market are all likely to have weighed on sentiment. However, the report also showed more Americans said jobs were plentiful than at any time in more than five years.

US manufacturing contraction persisted in March, according to the Richmond Fed??™s index. The index posted its third consecutive negative double digit read when remaining unchanged at -10 in March. Market expectations were for a small bounce to -5.

German IFO business confidence index rose unexpectedly in March to 107.7, from 107.0 in Feb. The increase was led by manufacturers and retailers. Export expectations slipped a little, but were more than compensated for by expected strong demand at home. Rising confidence points to a strong and robust economic upswing, despite the rise in sales-tax and a slowing US economy.

UK business investment rose 4.5% in Q4, stronger than market expectations of 3.3%. The revised business investment brings the possibility of an upward revision to GDP. Annual growth in business investment came in at a chunky 13.5%.