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Stocks saw strong gains while bonds declined, driven by positive GDP growth in Japan and the UK, along with solid US retail sales and initial jobless claims data, easing recent recession concerns. The S&P 500 rose 1.6%, while in Europe, the Euro Stoxx 50 and FTSE 100 increased by 1.7% and 0.8%, respectively. The yield on the US 10-year climbed 9 bps to 3.93%.
US retail sales surged in July by the most since early 2023, with the value of retail purchases, unadjusted for inflation, rising by 1%. However, US industrial production dropped by 0.6%, largely due to shutdowns in petrochemical industries caused by Hurricane Beryl. Strong retail sales and low jobless claims boosted expectations of a soft landing for the US economy.
Market has now reduced their expectations for a large Fed rate cut in September, now pricing in less than 30 bps of easing, and 92 bps of cuts in 2024. Federal Reserve Bank of St. Louis President Alberto Musalem indicated that the time to reduce interest rates is approaching.
The USD is sharply higher, in line with rising US Treasury yields.
NZDUSD is only slightly weaker in offshore trading, despite some volatility around the US data. Initial support is expected around 0.5980, with the long-term trend line at 0.5931 becoming increasingly important. On the upside, resistance is at 0.6020, and a break above 0.6080 could trigger significant market reactions.
NZDAUD remains down, testing 0.9050 overnight, following a drop after stronger-than-expected Australian employment figures in July. If it breaks this level, the market may look to test the key 0.9000 mark, which could reignite expectations of a full breakdown that many anticipated at the end of July. It’s challenging, especially with markets expecting Australian rates to stay higher for longer. However, this currency pair is known for being unpredictable, so the situation could change unexpectedly.
NZDEUR is moving back towards support levels. If it breaks below 0.5445, the next levels to watch are 0.5420 and possibly 0.5380. Resistance is still at 0.5525.
The end of the week feels a bit calmer. We begin with NZ PMI at 10:30, followed by speeches from the NZ and Australian Governors, and later UK retail sales and US building data will be released this evening.
Here are the latest mid-market rates:
| Currency Pair | Mid-market rate |
| NZD/USD | 0.5984 |
| NZD/AUD | 0.9053 |
| NZD/JPY | 89.22 |
| NZD/CNY | 4.2963 |
| NZD/EUR | 0.5453 |
| NZD/GBP | 0.4655 |
| NZD/HKD | 4.6649 |
| NZD/SGD | 0.7914 |
NZD/USD 24 HOURS
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