The NZD/USD continued its steady march towards 0.8000 overnight.
A more conciliatory attitude towards ‘risky’ assets allowed the currency to breeze through the 200-day moving average at 0.7955.
Investors were definitely in a mood to play up the positives overnight. Not only did expectations of more Fed policy easing juice up risk appetite, but investors were also encouraged by chatter a workable Greek government is close to being announced. And instead of worrying about weak European data, this was seen as increasing the chances of more policy easing there.
Global equity markets rallied, commodity prices rose, and ‘growth-sensitive’ currencies like the NZD and AUD outperformed at the expense of the ‘safe-haven’ USD.
A fairly positive result from last night’s global dairy auction probably helped shore up NZD sentiment. Milk prices eased 0.5% from the previous auction. Importantly, this means prices held onto nearly all of the previous auction’s 14% surge.
Keep an eye out for today’s March quarter NZ balance of payments data (BoP). We’re expecting a year-to-March current account deficit of 4.7% of GDP, from 4.1%.
The growing picture of imbalance in the NZ economy is one that may attract increasing attention over the coming year. However, for now, the BoP data will likely be glossed over as investors look ahead to tomorrow morning’s FOMC policy meeting. Some expectation of additional quantitative Fed easing is now priced into markets.
So if the Fed disappoints we’ll likely see a stronger USD knock the NZD/USD back below 0.7900. However, full blown QEIII from the Fed would likely pave the way for an eventual retest of 0.8200.