Market Update 18/06/2024

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Stocks market rose overnight as traders anticipate US retail sales data and look forward to statements from various Fed officials throughout the week. The yield on the US 10-year increased 5bps to 4.28%. Regarding the US data, the Empire State Manufacturing Index improved to -6.0 in June from -15.6 in May, signalling a modest decline in business activity. Despite the headline improvement, employment is weakening, and price metric suggest reduced inflation pressure. However, there is increased optimism about future business conditions.
 
In Fed speak overnight, Fed’s Harker mentioned that he considers one interest rate cut appropriate for this year, based on his current forecast, and expressed a desire to see several more months of improving inflation.
 
NZDUSD has a weak start to the week, finding some support overnight just above 0.61100. Weakness in the Chinese housing market added to Friday’s negative sentiment from weak US consumer confidence and political uncertainty. However, the US Empire State Manufacturing index helped the NZD to recover slightly, as the modest decline in the US business activity increases the likelihood of a rate cut in the US. In terms of levels, 0.6142 is an important Fibonacci point, while 0.6200 is still a challenging target. On the downside, 0.6100 has consistently supported over the past month, with several crucial levels just below, including a Fibonacci level at 0.6072, the 100-day moving average of 0.6069, and the 200-day moving average at 0.6062.
 
AUDUSD is steady at 0.6615 and NZDAUD has settled around 0.9270. Regarding the RBA meeting today at 4:30pm NZT, any indications of earlier rate cuts (before February) would weaken the AUD and slightly lift NZDAUD. Conversely, a more hawkish statement suggesting cuts pushed to later in 2025 would strengthen the AUD.
 
NZDJPY rose 0.6% from 96.11 to 96.75. The yen remains weak, with USD/JPY slightly up to 157.70, influenced by higher US Treasury yields. The BoJ’s indecision on policy tightening last week, delaying details on reducing bond purchases until the next meeting, keeps the yen soft for another month and increases the likelihood of further intervention.
 
NZDEUR has slightly declined from last week’s gains, while the euro being the best performer, rising by 0.3%. European markets have stabilized following last week’s selloff, with some recovery in French assets. Currently NZDEUR is trading at 0.5738 and might touch 0.5750 this week.
 
In the day ahead, the RBA is scheduled to announce its cash rate at 4:30pm, and no change is expected to the current rate of 4.35% and the press conference will follow an hour later. FOMC member Cook is also scheduled to speak at 1:00 pm NZT. Later in the evening, US Retal Sales data will be released just after midnight, followed by US Industrial Production shortly after, both closely watched for insights. FOMC member Barkin will speak at 2:00am NZT. The Global Dairy Trade price index is due out tomorrow morning to conclude the session.

 Here are the latest mid-market rates:

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