Risk Aversion Dominates Trading, NZD Resilient – April 24, 2014

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Risk Aversion Dominates Trading, NZD Resilient - April 24, 2014

Risk aversion was evident in recent trading, as the safe-haven currencies where supported against the higher-yielding ones. Except for the New Zealand dollar which gained on the RBNZ rate hike, other currencies ended lower to the Greenback and yen.

Despite weaker than expected US economic data, the US dollar managed to score gains against most of its major currency counterparts. The flash manufacturing PMI for April fell from 55.5 to 55.4 while new home sales printed a bleak 387K figure instead of the projected 455K. US durable goods and unemployment claims data are up for release today and this might not have such a huge impact on dollar movement, as risk sentiment is the key driver of price action so far.

The yen had a volatile day as it started off strong but ended on a weak note, particularly to the US dollar. There were no major reports released from Japan then as risk sentiment changes were responsible for most of the yen’s changing direction. There are no major reports lined up for today so more risk trading might be seen.

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Kiwi Resilient Against Risk Aversion

The Aussie lost a lot of ground in recent trading because of the bleak Australian CPI while the Loonie was unable to take advantage of the improvement in consumer spending, as retail sales figures simply came in line with expectations. Meanwhile, the Kiwi got a strong boost in today’s Asian trading session when the RBNZ decided to hike rates and express a hawkish bias. The central bank said that inflationary pressures could remain strong in the next couple of years, which led many to believe that another rate hike could be possible. Australian and New Zealand banks are on holiday today in observance of Anzac Day.

The euro sold off sharply when euro zone PMI data came in mixed. France reported lower than expected manufacturing and services PMI readings while Germany’s manufacturing PMI came in line with consensus. Its services PMI was stronger than expected, allowing the euro region’s services PMI to also beat the forecast. German Ifo business climate data is up for release and downtick from 110.7 to 110.5 is expected. Also due today is ECB President Draghi’s speech, which usually causes a lot of movement among euro pairs.

The pound gave up some of its recent gains when the BOE meeting minutes were not as hawkish as many expected. The minutes showed a unanimous vote when it comes to keeping monetary policy unchanged, with some policymakers highlighting the economic slack in the UK. Public sector borrowing data came in stronger than expected with a positive revision in the previous month’s figure. CBI realized sales is due today but this doesn’t usually have a large effect on pound movement.

To contact the reporter of the story: James Brennan at james@forexminute.com