The return of the carry has taken the New Zealand dollar to a fresh 25 year high against the US dollar and a new 17 year high against the Japanese Yen. The commodity currencies are the best performing currencies today as they shrugged off both dollar strength and commodity weakness.
The market expects the Reserve Banks of Australia and New Zealand to raise rates again this year given the strength of economic data for the former and the hawkishness of the central bank for the latter. Australian home loans were released last night and this was just as icing on the cake for a country that has already report very hot GDP and employment numbers. The Canadian dollar benefited from the overall rally in the commodity currencies. The stronger trade surplus and housing numbers offset the weaker employment figures. USD/CAD dropped from 1.1550 to 1.10 in the month of April. The fact that loonie strength did not hurt trade that month means that it has a greater chance of doing so in May and June. Looking ahead, there are key releases from all 3 countries so expect the action to continue in those pairs. Traders should be wary of picking a bottom in USD/CAD before a daily close above 1.0750.