- NZD/USD trades in a narrow range, as markets look to bigger fish to fry.
- The day ahead holds US CPI as well as Chinese trade.
- Markets are looking to the Sino/US signing ceremony as the major event for the week.
NZD/USD is currently trading at 0.6630 in a flat state following second-tier New Zealand data and subdued price action from overnight within 0.6620 and 0.6641. In recent trade, we have seen New Zealand Building approvals for November arriving at -8.5% MoM (vs the prior -1.1%). We also had the NZIER business opinion survey for Q4 business confidence index -21 (vs -40 prior). Markets took little notice. Instead, the focus is on the US and China again with reports that the US Treasury will remove China from its list of currency manipulators ahead of this week’s trade deal being signed.
It was reported earlier that the Chinese delegation has already landed in the US with a view to sign a phase-one trade deal this week and the combined headlines made for a risk-on rally that sent US yields higher as well as US stocks, supporting the commodity complex and underpinning the antipodeans that have traded as a proxy to the trade wars.
Looking to the central banks, the market is still pricing the RBNZ at “less than a 20% chance of a Feb easing, with the terminal rate around 0.87% (RBNZ OCR currently at 1.0%),” according to analysts at Westpac.
Key data on the horizon
For the day ahead, we now look to China December trade data that has no fixed time, (but likely around 2pm Syd/11am local). “Consensus is for the trade surplus to bounce to about $46bn, with exports improving to +3%yr and imports +10%yr,” analysts at Westpac called.
As for US data, December’s Consumer Price Index will be out with consensus 0.3%MpM, 2.4%YoY overall and 0.2%MoM, 2.3%YoY ex-food & energy. Recall that the Fed judges this series to consistently overstate inflation so targets the PCE deflator, which was a muted 1.5%YoY in Nov, 1.6% on the core rate. Even so, it can still impact on markets,” analysts at Westpac explained.