The NZDUSD opens lower at 0.8505 this morning.
The NZD dropped sharply yesterday afternoon following Fonterra announcing a forecast payout of $6.00 per kg of milk solids for the 2014/15 season – a massive $1.00 per kg reduction from the prior forecast. The payout is now $4 billion lower than last year and represents a 1.8% reduction in GDP.
The NZDUSD dropped from the 0.8550 region to 0.8520 in immediate response to the Fonterra news, and continued lower overnight to post a 7-week low of 0.8495. The NZDAUD fell to a low of 0.9050 overnight – a level last seen in December 2013, while the NZDGBP touched a 5-month low of 0.5010. The NZDEUR dropped to a 7-week low of 0.6328.
The USD strengthened on much better than expected consumer confidence numbers, although the positive sentiment was restrained by some disappointing US house price data.
Main focus over the next 24 hours will be on the US Federal Reserve interest rate announcement and accompanying statement. They will continue to taper their bond-buying program by $10 billion - most attention will be on their economic outlook for an indication on when they will start to raise interest rates.
Global equity markets were mixed on the day – Dow -0.4%, Nikkei +0.6%, Shanghai +0.3%, FTSE+0.3%, DAX +0.6%
Gold prices fell 0.4% to USD$1299. Oil prices gained +0.1%.
The current indicative mid-rates are:
NZDUSD 0.8505
NZDEUR 0.6340
NZDGBP 0.5020
NZDJPY 86.85
NZDAUD 0.9065
NZDCAD 0.9230
NZ Building Consents will be released at 10:45am.
US GDP figures hit the tapes tonight, followed the Federal Reserve interest rate announcement at 6am tomorrow 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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