By Dan Bell
The NZD/USD opens around 0.8450 this morning and has been very strong against the AUD trading to an 11 month high over 0.7950.
NZ Q2 CPI is released at 10:45am this morning. The market consensus is for +0.8% for the quarter - anything higher then this will be a serious concern for the RBNZ - the next OCR meeting is next week (Thursday 28/07/11).
The EU debt crisis continues to be in focus with Euro zone leaders expected to meet in Brussels this week (July 21) to discuss a second bailout package for Greece and the financial stability of the euro area.
The stand-off continues in the United States where Congress must raise the $14.3 trillion limit on U.S. borrowing by Aug. 2 or the government will run out of money to pay its bills, causing turmoil in global financial markets and potentially sending the United States into another recession.
Global equity and commodity markets had a stronger night on Friday with the Dow Jones up 0.34% while commodities were generally higher with the CRB Index up 0.46%.
The AUD has been under pressure as the market becomes more convinced the RBA will be cutting rates this year. The AUD/USD opens in the low 1.06’s after trading to almost 1.08 last week. Minutes from the most recent RBA meeting are released tomorrow will be closely watched. Westpac's economists now see 100 bps of rate cuts in Australia. See more here at SMH.com.au.
The results of the European bank stress tests had only 8 out of 90 banks fail - well below the 30% expected failure rate.
The NZD remains firm against the EUR and trading at multi year highs close to 0.60 and against GBP close to post float highs around 0.5250. Against JPY we open around just under 67.00.
Second quarter corporate earnings from the US continues this week after a positive start last week.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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