Investors weigh up risk ahead of key Monetary Data

Investors weigh up risk ahead of key Monetary Data
By Andrew May - Sales Trader CMC Markets New Zealand

The New Zealand dollar continues to flirt with US 86c, down 30 points overnight to 0.8565 after deteriorating data out of the US showed the manufacturing sector contracted 49 points when expectations for the Chicago Fed Index were for a more gregarious 52.5. A strange dichotomy to the later however has ensured a well supported Kiwi above 0.8550 relieving any immediate downward pressure - This in the form of an incredibly positive February S&P/Case Schiller composite index which gained 1.2% topping forecasts of 0.9%. And coupled with a surprisingly buoyant 68.1 point (vs 61 street) April Consumer Confidence survey has seen the Kiwi firmly entrenched in springboard formation awaiting key data releases.

It is important to remember however that this is not the only benign piece of news received this week keeping risk bulls at bay. Investors have been treading water carefully after European powerhouse Germany appeared to be cracking under duress as inflationary, retail sales and unemployment underperformed. These fundamentally negative increments seeping through the ECB's ceiling are calling for an inevitable rate cut when the Central Bank convenes tomorrow night. The question for traders to be cautious of here is whether or not the market has factored such a move already.

Let us not forget the conclusion of the 2 day US FOMC meeting due before hand that strongly suggests no further tampering to its asset purchasing programme will be on the cards care of amongst other things dire US 1st quarter GDP. Traders will need to decide carefully whether to hold substantial risk into the weekend leading up to the monthly US non farm payroll data. A strong revised private payroll number due prior should provide indicative footing.

Today however will be a test of whether the NZD will keep its toes on the US 0.8550 spring board or slip away gracefully as New Zealand's new number one export destination - China, releases its April headline PMI. A number south of 50 will exacerbate an imminent fall and could set the stage for further losses as we head into important US and European monetary decisions.

ENDS

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