Market Update 27/08/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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Equity markets showed mixed performance, with US stock indexes dragged down by underperforming mega cap tech stocks, leading the S&P 500 to slip by 0.3%. In Europe, the Euro Stoxx 50 also declined by 0.3%, while the UK market was closed. Bond yields edged higher, with the yield on the US 10-year Treasury rising by 1.5 bps to 3.81%.
 
US durable goods orders jumped 9.9% m/m in July, this was much higher than the anticipated 5.0% m/m increase. The main reason for this surge was a large number of aircraft orders, which are part of the transportation sector. However, the transportation sector is known to be volatile, meaning it can fluctuate greatly from month to month. When you exclude transportation from the data, the overall durable goods orders actually decreased by 0.2% compared to June, which was slightly worse than the expected 0.1% decline. Additionally, shipments of capital goods excluding aircraft, which is an important indicator of business investment in equipment of GDP, fell by 0.4% m/m. This decline was worse than the expected 0.1% m/m increase.
 
USD weakness continues to dominate the FX markets, even though there was a slight rebound last night. The dollar index (DXY) remains near its lowest levels in the past 12 months, hovering in an area that has historically provided strong support.
 
NZDUSD has eased back from its strong gains last week and is now hovering just above the 0.6200 level. After last week’s 3% surge, the pair lost some momentum, with the RSI approaching overbought territory. It’s currently down 0.4% from last week’s close and seems like it won’t venture too far from the current level.
 
NZDAUD direction will be shaped by developments in Australia. Tomorrow, the monthly CPI indicator will be released, followed by retail sales data on Friday. If these figures come in stronger than expected, it could reinforce the RBA’s tightening stance and push NZDAUD back below 0.9100.
 
NZDEUR has dipped slightly. Germany’s IFO Business Climate Index dropped by 0.4 points to 86.6 in August, marking its lowest level since February. The current business situation worsened as the Business Situation Index fell by 0.6 points to 86.5, continuing its downward trend to reach its lowest point since July 2020. Business expectations also declined, falling by 0.2 points to 86.8. Both the manufacturing and services sectors weakened, aligning with Germany’s composite PMI, which further slipped into contraction territory in August. 
 
The economic calendar remains light in the day ahead with no major Tier 1 data scheduled for release.
 

Here are the latest mid-market rates: