Australian, New Zealand & Canadian Dollars Suffer on USD Recovery
At the weekend the commodity currency complex is seen licking its wound. The Australian, New Zealand and Canadian dollar's all declined in the region of a percent against the USD over the hours preceding the week's close.
Between the AUD, NZD, and CAD, the oil-embattled CAD suffered the most.
Currently, WTI oil is priced closed to US $32 per barrel and Brent is near US $36 per barrel, mirroring 2007 to 2008 lows.
Lloyds Bank Research speculates, “[USD/CAD] resistance will initially be found at the psychological 1.40 level, but unless there is some stabilisation in oil, this will give way and CAD weakness will extend.
“Going forward, oil will be a key driver of markets, with its volatility (particularly to the downside) impacting sentiment, and its direction important for inflation and subsequently monetary policy expectations.”
AUD/USD under Persistent Pressure
Like its CAD commodity counterpart, the AUD came under increasing downside pressure from a strong USD, still reaping gains from a US interest rate lift-off.
Jeremy Stretch from Canada's CIBC states, “The Australian strategy of selling state assets, bringing in net inflows, to fund new railways, roads and hospitals is proving to slow the slide in the AUD.
“However, with iron ore remaining under pressure, while domestic politics remain febrile suggests maintaining a negative AUD bias, even should the RBA prove able to resist pressure to ease again.
"We have seen something of a triple bottom in AUD USD at around 0.7150/60. A breach remains necessary to encourage a test towards 0.7080/90, below there look for 0.7017 lows seen in early November.”
NZ Finance Minster Puts a Lid on New Zealand Dollar
New Zealand third quarter GDP surprisingly grew by 0.9%, beating expectations.
But this welcomed good news was somewhat overshadowed by the Finance Minister Bill English's statements that, “the currency remains overvalued and that a weaker currency would be desirable.”
He also criticised the Reserve Bank of New Zealand (RBNZ) saying, “the deceleration in the growth trajectory was partly the responsibility of the central bank, due to over-tightening in 2014.”
CIBC's Jeremy Stretch was bearish NZD:
“While the RBNZ may have now fully reversed last year’s hikes the market remains mindful of how the authorities can drive down the NZD further, beyond just relying on front end spreads moving towards the USD.
“While Q3 GDP rebounded aggressively, due to a 2.8% gain in manufacturing (the fastest expansion since Q4 ’12) the annual rate of growth eased to near a two year low, at 2.3%.
“With exports likely under pressure in Q4, due to lower dairy shipments, expect growth momentum to be in focus, this comes as we favour a test of 0.6685. Rallies up to 0.6785/95 provide better levels to sell,” concludes Stretch.
