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Equity markets finished the week on a positive note as Wall Street kicked off earning season and also supported by optimism around the US economy avoiding a downturn. The S&P 500 gained 0.6%, the Euro Stoxx 50 increased by 0.7%, and the FTSE edged up 0.2%. Meanwhile, the yield on the US 10-year Treasury rose by 4 bps to 4.10%.
US PPI was unchanged in September after a 0.2% rise the previous month, easing due to lower gasoline costs, which suggests further progress toward controlling inflation. Fed officials will consider both this report and Friday’s CPI data, which showed a slightly higher-than-expected rise in inflation driven by increased costs for housing, food, and clothing. Economists analyse the PPI data for categories relevant to the Fed’s preferred inflation measure, the PCE price index and the results were mixed.
US consumer sentiment according to the University of Michigan’s index unexpectedly fell for the first time in three months. Ongoing frustration with high living costs outweighed more positive views of the job market. The October sentiment index dropped to 68.9 from 70.1 in September, below the expected 70.9. The report also revealed that consumers expect prices to rise 2.9% over the next year, up from 2.7% in September, marking the first increase in five months.
Fed’s Goolsbee stated that he doesn’t see clear signs that the economy is overheating, even after the strong September jobs report. He emphasized that inflation has slowed considerably while the labor market remains robust. When asked about his main concern, the Chicago Fed chief mentioned that officials must stay vigilant about the possibility that strong demand could reignite inflation.
Overall USD remained steady against major currencies.
NZDUSD ended the week slightly higher around 0.6110, despite concerns following the RBNZ’s 50bp rate cut on Wednesday. This week’s CPI data for New Zealand will be out on Wednesday, it could show annual inflation returning to the 1-3% target range, which would support further rate cuts by the RBNZ to ease the economy. A lower-than-expected CPI figure could push the NZD down toward 0.6050, while a higher number would likely support the NZD. Key support levels for NZD are at 0.6095 (200-day moving average), 0.6085 and 0.6050, with psychological support at 0.6000. On the upside, the 100-day and 50-day moving averages sit at 0.6125 and 0.6165, respectively.
NZDAUD is trading in a similar range as last week. For the AUD, the key focus this week is the September labor force survey on Thursday. Employment growth is expected to have slowed following a series of strong job reports, with the unemployment rate projected to hold steady at 4.2%. A slowdown in employment could give the NZD some room for short-term recovery against the AUD.
NZDEUR reached a high of around 0.5720 15 days ago but has since given back about half of that gain over the last two weeks. A key resistance zone has developed at 0.5530-0.5560, which needs to hold for the pair to maintain its upward momentum. On the upside, the 100 and 200-day moving averages, both near 0.5600 present a significant challenge that must be overcome for the pair to continue rising. On Thursday it is the ECB’s interest rate decision, with expectations that the ECB will reduce rates by 25bps to 3.25%, following a significant slowdown in eurozone business activity in September. However, the market’s response will likely depend on the accompanying statement and Lagarde’s press conference.
The NZ services sector PMI for September is set to be released today, along with the electronic card transactions data for the same month. Governor Orr is also scheduled to speak, though his remarks aren’t expected to impact the market. There’s no major international data to highlight today.
Here are the latest mid-market rates:
Currency Pair | Mid-market rate |
NZD/USD | 0.6098 |
NZD/AUD | 0.9047 |
NZD/JPY | 91.00 |
NZD/CNY | 4.3111 |
NZD/EUR | 0.5580 |
NZD/GBP | 0.4670 |
NZD/HKD | 4.7322 |
NZD/SGD | 0.7973 |
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