The NZDUSD opens sharply higher at 0.8495 this morning.
It was all about the European Central Bank overnight. The ECB cut all its main interest rates to record lows, including a negative deposit rate (-0.1%) for banks parking overnight funds with the central bank.
They also announced a range of other measures to loosen monetary policy to combat dangerously low inflation, however the ECB stopped short of large scale asset purchases (aka quantitative easing). The EURUSD initially plunged to a 4-month low after the ECB cuts, but this was short lived and the currency soon rallied to gain over 0.4% on the day.
The ECB decision helped to trigger a 'risk on' environment. US Treasury prices rose (i.e. lower yields), global equity markets rallied, as did commodity and emerging market currencies. The NZDUSD gained over 1%, and managed to sneak above 0.8500, albeit briefly. The NZD also made gained against all other major currencies.
Now the ECB is out of the way, at least for the moment, focus turns to tonight's influential US non-farm payroll employment figures. Solid growth in job numbers will reinforce the view the US economy is continuing to improve.
Global equity markets were higher on the day - Dow +0.6%, Nikkei +0.1%, Shanghai +1.1%, FTSE -0.1%, DAX +0.2%
Gold prices rose 0.7% to USD$1252 overnight. Oil prices gained 0.5%.
The current indicative mid-rates are:
NZDUSD 0.8495
NZDEUR 0.6220
NZDGBP 0.5055
NZDJPY 87.05
NZDAUD 0.9100
NZDCAD 0.9285
Nothing is scheduled on the domestic data calendar today.
The all-important US non-farm payrolls employment numbers hit the tapes overnight.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »
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