April 25, 2019 — 4 min read
The AUD opened at 0.7013, and the NZD opened at 0.6623 this morning.
Although the NZD is up over this time yesterday, it is still struggling to make up the lost ground since Australia’s poor CPI data on Wednesday. In case you missed it, Australia’s CPI, or inflation data came in at 0.0% q/q. This figure is closely watched by the Reserve Bank of Australia, and the market sold off heavily on the back of it. Although this was Australian specific data, as is often the case, the NZD fell in sympathy.
Closer to home, we have NZ’s trade balance out at 10:45, though this is probably not going to be too much of a market mover. Overnight, the United States will come out with the Advanced GDP figures, and a really strong report there would really solidify the US' fortunes in currency markets. NZ/AUS is “definitely cutting” its narrative, which is where the big moves are coming from.
Going slightly further afield, something to keep a loose eye on, is the exchange rates of some emerging market currencies, notably the Turkish Lira and the Argentinean Peso. Since the start of the year, Turkey’s currency is off 12% against the USD, and Argentina’s is off just over 20%. The more the currencies drop, as both countries have to pay back loans in USD, the more underwater those loans become.
The respective central banks try to hike interest rates (Turkeys is 24%, Argentina’s is 68%). To support the currencies, they also sell down their foreign exchange reserves in an attempt to prop the local currencies back up. The problem is these reserves are finite, and when they run out, (or more to the point, the market thinks they will run out), you can get very large moves in rates, that can spill over into the wider market.
The flash crash on Jan 3rd, which affected all the major currencies, was precipitated initially by a move in the Turkish Lira, so it's worth keeping an eye on these pairs as a barometer for risk appetite.
Global equity markets are off a touch, - Dow -0.51%, S&P 500 -0.04%, FTSE -0.50%, DAX -0.25%, CAC -0.33%, Nikkei +0.48%, Shanghai -2.43%.
Gold prices are flat, trading at $1,279 an ounce.
WTI Crude Oil prices are off their recent highs, down 1.1% trading at $65.03 a barrel.
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