The pair has taken a sizeable hit after the RBNZ were more hawkish than expected. The market had expected a more nuanced approach from the RBNZ given the softening of the dairy prices and stronger migration, however that failed to materialise. The central bank left its forecast for the three-month bill to be at 4% by year-end and given the swaps market had 60 basis points priced in, you can see exactly why the NZD rallied. The fact that the market pricing was around 15 basis points shy of the RBNZ forecast should support the NZD. At 11:30am today we get Australian jobs data and consensus expects 10,000 jobs to be created (range of 25,000 to 5,000), while unemployment rate should stay at 5.8%.
US Light Crude
US light crude is trending higher and looks strong on the daily chart. The $105.21 area has acted as a ceiling for this commodity for some time, so a break here would be welcomed by the energy bulls. Tensions in Iraq have been one of the reasons for the upside, with an Al-Qaeda offshoot reportedly taking over four Iraqi cities and the concern here is we could see damage to Iraq’s energy infrastructure. A break of $105.21 would bring out new momentum focused traders.
Global airlines have been dealt a blow, with multiple factors at play. Concerns around the Export-Import Bank have been cited after US House majority leader Eric Cantor was defeated in a primary election. The Export-Import Bank arranges financing to help airlines purchase aircrafts and the concern is Mr Cantor’s replacement could pull this funding. In Europe we also saw a downgrade to operating profit from Lufthansa, while Emirates pulled its massive order for Airbus’s A350 orders. Qantas could follow the overseas sentiment.
We saw heightened volatility in the US, with the Dow Jones index trading in a 100 point intra-day range, which is the first 100 point range since May 20. Boeing contributed a large percentage of the points, so unless we see follow through selling it’s hard to see this move replicated in the upcoming session. The key data release in the US is retail sales and traders are expecting to see a 0.6% increase. A good number could see the upside momentum seen in bond yields and equities continue, although a poor number could add weight to the bears argument that a pullback is needed.