A$ finds its feet; Japan GDP / BOJ in focus
The Aussie dollar took a turn higher in yesterday's domestic session following stronger than expected Westpac consumer confidence data. Short-term resistance around the 103.2/3 US cent areas was quickly broken before selling activity around 103.6 US cents contained the momentum. Nonetheless, there was little to encourage second-leg higher overnight in a largely risk-neutral session.
U.S equities failed to build on recent momentum with a handful of economic releases coming in largely in line with expectations. The release of retail sales showed sales recorded 0.1 percent growth in January, down from 0.5 percent growth in December. Its apparent market participants are lacking fresh 'good news' to drive stocks materially higher, with many predicating a corrective phase in the weeks ahead.
Local data on today's docket includes consumer inflation expectations which may prompt a small degree of rate's related repositioning.
Other data points of note today including Japan 4Q GDP and the Bank of Japan policy decision later this afternoon, for which the AUD-JPY cross should encourage residual support/weakness for the AUD-USD, and may prompt a break-out of its current range between 103.2 and 103.6.
Still, today's BOJ policy decision has none of the amped-up expectations we saw in January, with markets not counting on any new stimulus measures until Aprils meeting which will see a new governor at the helm. It is not yet known whom will take over the reins from current Bank of Japan Governor Masaaki Shirakawa, but speculation in the coming weeks over Prime Minister Shinzo Abe recommendation will no doubt be a top-tier influence.
While we anticipate conjecture in the lead up to the new governor's appointment to remain a key Yen directive, we can't right off today's meeting as a key short-term market mover. Certainly there is lot of attention surrounding the Yens remarkable depreciation and markets will be watching for the BOJ's point of view ahead of the G-20 meeting, for which the topic of currency devaluation will be at the top of their agenda.
Kiwi uptrend simmers; English faces intervention calls
The AUD-NZD downtrend seen in recent sessions has petered out coinciding with the Westpac Consumer Confidence data yesterday, while neutral risk trends failed to keep the upside momentum alive for the NZD-USD pair overnight with price action consolidating below the circa 84.35 US cent barrier.
Yesterday, Finance Minister Bill English faced the Finance and Expenditure Select Committee, candidly answering questions surrounding the high exchange rate, and the government's willingness to halt the Kiwi's appreciation.
While acknowledging the risk to New Zealand's export competitiveness, English stated: "We'll be out in the war zone with a peashooter," when asked why the government have not made steps to depreciate the currency.
It's clear such questions are misguided. The premise of a relatively small country like New Zealand using conventional intervention methods to encourage sustained currency weakness is unrealistic. Any move to do so in the form of direct currency intervention and/or peg to the greenback could be likened to rowing against the rapids if global conditions continue to encourage strength from high-beta currencies attached to fundamentally sound economies (on a comparative basis). Such moves to influence the exchange rate would also need to be independently evaluated and subsequently thwarted by the RBNZ.
At the time of writing the kiwi is buying 84.15 US cents.