By Dan Bell
The NZD/USD managed to bounce off yesterday’s lows under 0.7650 and opens around 0.7700 this morning.
The USD was stronger across the board yesterday afternoon as risk aversion flared up through the Asian trading session. A more stable night for US equities has seen sentiment improve with the EUR/USD back over 1.35 and the AUD/USD over 1.0150 this morning.
US stocks are currently trading flat with the S&P 500 +0.02%. Commodities are marginally higher with the CRB Index up 0.37% led by oil prices up 2%.
The spread between German and French government bond yields pushed out to its widest point since the inception of the Euro overnight. Both economies still have a AAA sovereign credit rating but the market is requiring France to pay 2% more for their debt.
New Italian PM Mario Monti formed a new government in Italy last night. While the market has more faith in Monti’s ability to deal with Italy’s debt woes Italian bond yields remain stubbornly high just under 7%.
Greek Prime Minister Lucas Papademos's crisis coalition cleared its first hurdle on Wednesday by winning a vote of confidence, but he faces a big task ahead to get the necessary political support to pass the painful reforms needed to avert national bankruptcy.
US Inflation data overnight came in lower than expected with the CPI for Oct at -0.1%. Energy prices were down 2%. One of the benefits of the recent drop in commodity prices is the lower inflation we are getting around the world which should see global interest rates remain lower for longer.
Another bright spot was better than expected US Industrial Production which rose 0.7% last month.
Not much to report on the local front- NZ PPI is released at 10:45. From Australia RBA Gov Stevens is speaking at 10:30 this morning.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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