NEWS / Foreign Exchange

AUD recoups post-CPI losses

NZD recovers ahead of OCR

The NZD followed the AUD lower on Tuesday, following weaker than expected inflation data across the Tasman. The currency softened from an early high of 0.7465, dipping briefly below 74c to an intraday low of 0.7392. With local markets closed yesterday in observance of the ANZAC Day holiday, off-shore trade saw the NZD recover from these lows. The currency opens this morning at 0.7440, with the Reserve Bank??™s OCR review due for release at 9.00 a.m.

AUD recoups post-CPI losses

The AUD fell sharply on Tuesday following the release of weaker-than-anticipated Q1 inflation data. The headline reading of 0.1% was substantially softer than market expectations of 0.6%, and weakens the case for a near term rate hike in Australia. The AUD slid from an early high of 0.8340, posting an intraday low of 0.8240 following the release. However, the currency recouped these losses during offshore trade and, with local markets closed yesterday, posted a high of 0.8349. The AUD opens this morning at 0.8335.

Soft US housing data weighs on USD

The USD has faced increased selling pressure over the last two sessions after a spate of economic data did little to bring the bulls out. On Tuesday it was weak existing home sales and consumer confidence that did the damage, whilst on Wednesday lower than expected new home sales kept the spotlight firmly on slowing economic growth. The negative sentiment towards the USD was fairly reflected against most of the majors with the euro reaching an all time high of 1.3665 and the USD index falling for the 11th time in 12 sessions to post a two year low of 81.41. Against the yen the USD fared a little better by clinging onto the 118 handle and opens this morning around 118.70.

US durable goods orders up 3.4% in Mar. Orders posted a broad-based 3.4% jump in March, just a whisker shy of Westpac??™s 3.5% forecast. This corrects for some of the weakness seen earlier in the quarter. Although Boeing??™s impressive orders performance once again supported the data, in March there were also decent gains for other transport, electrical equipment, machinery, and metals, all of which had been somewhat lacklustre earlier in the first quarter. But the big news was the 4.7% jump in core capital goods orders, after two very weak months. That means it is still reasonable to hold out hope for a near-term recovery in business investment.

US new home sales gain of 2.6% in Mar was less impressive. There was a weather effect apparent in the report, with both the northeast and midwest posting recoveries of sorts after Feb blizzards cut sales. But, new home sales are showing only the barest signs of ???bottoming out???. Also interesting to note is that new home prices were reported up 6.4% yr, their strongest for several quarters. So the report is not really conclusive in any direction.

US Fed Beige Book: modest to moderate expansion with stable prices. Most districts noted only modest or moderate expansions in economic activity, with the odd district more upbeat. Consumer prices remained generally stable or increased modestly. Many districts reported weak residential real estate activity and a decrease in homebuilding. But, most districts reported positive retail sales and continuing tight labour market conditions.

German IFO rises to 108.6 in Apr. German business seems to be shrugging off concerns about the stronger euro, renewed energy price  gains and slower US economic growth. With the VAT hike in Jan not the drag on growth that was anticipated, this measure of confidence is now just 0.1 pt lower than its multi-decade high of 108.7 seen at the end of last year.

UK GDP growth held steady at 0.7% in Q1, a touch stronger than expected, although the annual growth rate lost a little steam, at 2.8% yr from 3.0%yr.