The New Zealand dollar pushed sharply higher overnight following a third successive Reserve Bank interest rate hike. Despite warnings that the currency was over-valued from Governor Wheeler, there was generally hawkish rhetoric which pushed NZD/USD sharply higher to a peak around 0.8680 from 0.8540.
There was a significant spill-over effect on the Australian dollar as AUD/USD spiked above the 0.9400 level with a peak just above 0.9410. There was a spike lower following weaker than expected headline jobs data as employment fell over the month, but there was strong support on approach to 0.9350 with a fresh move higher to above 0.9400.
The Euro was unable to make any significant impression in early Europe and retreated to test support below 1.3520 during the European session. There was further underlying pressure on the crosses as EUR/GBP dipped to fresh 18-month lows while EUR/JPY also dipped to below the 138.0 level. EUR/USD did find support below 1.3520 with expectations of strong bids into the 1.3500 area.
There were expectations of a robust US retail sales report and wider confidence in the US outlook which underpinned the dollar into the release. In the event, the headline data was a slight disappointment with sales gaining 0.3% for May while core sales rose 0.1% compared with an expected 0.4%. Although there was a significant upward revision to the previous month which helped lessen the impact to some extent, markets were positioned for a stronger figure and there was a dollar retreat following the release. Jobless claims were also slightly higher than expected at 317,000 in the latest week from 313,000.
EUR/USD rallied back to the 1.3540 area as USD/CHF was again unable to hold a position above 0.9000. USD/JPY had rallied back above 102.00, but progress was reversed quickly with a fresh slide to below this level.
GBP/USD rallied sharply early to around 1.6840 in the European session as pressure on the Euro cross boosted the UK currency and the wider dollar setback underpinned the pair in New York. There was uncertainty ahead of a key Mansion House speech by Bank of England Governor Carney later on Thursday amid speculation that the government would look to tighten housing-sector regulation in an attempt to head off the threat of an early increase in interest rates. The latest RICS housing survey suggested some slight cooling of the housing sector around London, but GBP/USD held above 1.6800.