Market Update 26/07/2024 

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Equity markets recovered slightly overnight due to a strong US Q2 GDP report, but gains were reduced later in the session. The yield on the US 10-year bond dropped by 2.4 bps to 4.26%.
 
The US GDP grew at an annual rate of 2.8% in the April-June period, an increase from 1.4% in the previous quarter. Personal spending, a key driver of the economy, rose by 2.3%, which was higher than expected. The combined growth rate for the first half of the year is 2.1%, matching the estimates. The market might view this as confirmation that the Fed will likely cut rates in September.
 
In secondary data, order for durable goods fell by 6.6% in June, primarily due to a decrease in aircraft orders. However, if transportation is excluded, orders actually increased by 0.5%, which was better than anticipated. The number of jobless claims, which can be tricky to interpret during this season, decreased by 10,000 to 235,000, slightly below what was expected.
 
Strong GDP figures have reduced concerns about a US recession and bolstered confidence in a gradual economic slowdown. Despite this positive data, it hasn’t altered the belief that the Federal Reserve will soon begin cutting interest rates. The strong GDP results indicate that the Fed might delay rate cuts until September instead of making an immediate cut next week.
 
NZDUSD continues a back foot, fell to new low of 0.5883 overnight. The support level near the April low of 0.5850 is being closely watched. Current support is at 0.5890, and resistance levels are at 0.5960 and 0.6000.
 
NZDAUD oddly recovered to 0.9060 last night before dropping back down to 0.9000. Current support is at 0.8950, and resistance at 0.9035.
 
NZDJPY dropped to 89.80 but then recovered to 90.60. The recovery of JPY is linked to the unwinding of carry trades, driven by increasing expectations that the Bank of Japan (BoJ) will raise interest rates at its July policy meeting next week. The process of unwinding short yen positions led to USDJPY falling slightly below 152.00, but it has since risen back to just under 154.00, with most of this rebound happening after the release of the US GDP report.
 
NZDEUR remains below 0.5525, a key long-term support/resistance level, making it difficult to be optimistic about this currency pair. Recent comments suggest that rapid or frequent rate cuts are unlikely, which contrasts with the expectations for the NZD. Current support levels are at 0.5420 and 0.5370, while resistance is at 0.5490 and 0.5525. Bundesbank President Joachim Nagel indicated that the European Central Bank might lower borrowing costs if economic data does not show negative surprises, noting that if data remains stable over the next year, there could be opportunities for further rate cuts at future meetings.
 
Today, New Zealand will release consumer confidence data and Tokyo will publish its CPI figures. Tonight in the US, personal income and spending data will be released, along with the PCE deflator for June.
 


Here are the latest mid-market rates:

NZD/USD 24 HOURS 

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