Kiwi Soars, Aussie Up, Dollar Eases; Ahead – US CPI

Euro, Sterling, Yen Flat; Yields Rise, Stocks End Mixed

Summary: New Zealand’s Kiwi found its wings, soaring 0.53% to 0.6150, its highest finish in a month. With New Zealand’s economy showing signs of resilience, some analysts point to a rate increase from the RBNZ. The RBNZ meets on interest rates later this month, on 28 February. 

The Australian Dollar lifted above 0.65 cents to 0.6525 on the back of the Kiwi’s performance and a modestly softer US Dollar. The Aussie rose last week after RBA Governor Bullock said the central bank was focused on bringing down inflation. 

The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies, eased to 104.07 from 104.15. A downward revision to the US CPI to 0.2% from 0.3% by the Bureau of Statistics weighed on the Greenback.

The Euro edged higher against the US Dollar (EUR/USD) to 1.0783 (1.0775). Sterling settled at 1.2628 against Friday’s open at 1.2615. Last week Bank of England policymaker Catherine Mann saw inflation risks leaning to the upside due to the deepening Red Sea crisis.  

USD/JPY edged lower to 149.25 (149.36 Friday). Against the Asian and EMFX, the US Dollar was mostly lower. The USD/SGD pair (Dollar-Singapore Dollar) dipped to 1.3445 from 1.3475 while USD/THB was last at 35.85 from 35.90. 

The USD/CNH (Dollar-Offshore Chinese Yuan) settled at 7.2170, little changed from 7.2160. Risks of deflation in the Chinese economy weighed on the Chinese Yuan. 

Global bond yields edged higher. The US 10-year Treasury bond rate closed at 4.18% from 4.17%. Germany’s 10-year Bund yield climbed to 2.38% from 2.35%. The UK’s 10-year Gilt yield was last at 4.08% from 4.05%. 

Wall Street stocks finished mixed. The DOW dipped to 38,637 (38,708) while the S&P 500 closed at 5,825, up from 4,999. Japan’s Nikkei edged higher to 37,140 (37,090). 

Economic data released on Friday saw Germany’s Final CPI (m/m) flat at 0.2% against forecasts at 0.2% which was the previous number. Canada’s Jobless Rate eased to 5.7% from 5.8%. 

-          NZD/USD – The Kiwi outperformed, jumping to 0.6150 from 0.6090, as expectations of an RBNZ rate hike in their February 28 meeting rose. ANZ Bank anticipates that New Zealand’s central bank will increase its Overnight Cash Rate by 25 basis points. 

-          AUD/USD – Australian Dollar climbed above 0.65 cents to 0.6525 in late New York, up from Friday’s open at 0.6485. Recent comments from RBA Governor Michelle Bullock that they were focused on bringing inflation down supported the Aussie.

-          EUR/USD – the Euro settled modestly higher against the US Dollar to 1.0783 from Friday’s open at 1.0775. There was little to drive the shared currency outside its recent range. Germany’s CPI showed no changes from its preliminary prints.

-          USD/JPY – against the Japanese Yen, the US Dollar was last at 149.25 from 149.36. In subdued trade the overnight high recorded was 149.58. The Greenback traded to an overnight low at 149.00. 

On the Lookout: 

The week ahead sees China as well as some Asian countries celebrating the Lunar New Year with public holidays. Today’s highlight is a speech coming from RBNZ Governor Adrian Orr ahead of the RBNZ’s rate decision later this month. There are no major economic data releases scheduled for today. This week’s big event is the release of the US January Headline and Core CPI report, due early on Wednesday (midnight – 12.30 am Sydney). 

Trading Perspective: 

After climbing on Friday, the Dollar eased heading into this week’s US CPI report, which was revised downward. While US bond yields were lower, other global rates also dipped. Asian markets will be subdued today with regional centers closed for the Lunar New Year celebrations. 

Softer US CPI and Retail Sales data this week would cap US rates and send the Dollar lower following its rally which began this year. For today we can expect more consolidation with the Greenback weaker against all its Rivals. 

-          AUD/USD – a weaker Greenback will push the Australian Dollar higher, outperforming its peers. On Friday, the Aussie finished above 0.65 cents to 0.6525. Look for immediate resistance at 0.6540 (overnight high traded was 0.6534). The next resistance is found at 0.6570. Immediate support can be found at 0.6490 followed by 0.6460. Look for the Aussie to stay supported in a likely range today of 0.6490-0.6550. Prefer to buy dips. 

-          EUR/USD – the shared currency advanced modestly against the US Dollar to 1.0783 from 1.0775 Friday. On the day, look for immediate resistance at 1.0795 (overnight high). The next resistance level is found at 1.0830 and 1.0860. Immediate support can be found at 1.0750 (overnight low traded was 1.0754). The next support level lies at 1.0720 followed by 1.0690. Look for the Euro to consolidate in a likely range of 1.0750-1.0820. Trade the range.

-          USD/JPY – against the Japanese Yen, the US Dollar edges lower to 149.25 (149.36). Look for immediate support likely at 149.00 (which was the overnight low). The next support level can be found at 148.70 and 148.40. On the topside, look for immediate resistance at 149.60 (overnight high traded was 149.58). The next resistance is found at 149.90. Look for consolidation in a likely range today of 149.00-149.70. Prefer to sell rallies. 

-          GBP/USD – Sterling gained modestly against the overall weaker Greenback to 1.2628 from 1.2615. On the day, look for immediate resistance at 1.2645 (overnight high traded was 1.2643). The next resistance level is found at 1.2675. On the downside, immediate support can be found at 1.2590 followed by 1.2560 and 1.2530. Look for Sterling to trade in a likely range today of 1.2580-1.2680. Prefer to buy Sterling dips.

Happy Monday and trading all. Have a good week ahead.

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