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The Opening Bell: Where currencies start on Wednesday, December 3, 2014

Currencies
The Opening Bell: Where currencies start on Wednesday, December 3, 2014

By Dan Bell

The NZDUSD opens lower at 0.7800 this morning.

Milk prices fell at the latest installment of Fonterra’s Global Dairy Trade auction. The GDT Price Index fell 1.1% while volumes dropped 0.9% compared with the previous auction. The next auction will be held in 2 weeks, while Fonterra is set to lower its 2014/15 farmgate milk price payout from $5.30 to somewhere under $5.00 on Tuesday next week. Not great news for the NZ economy or the NZD.

The NZDUSD fell overnight on USD strength and falling commodity (dairy) prices. Data released from the US indicates the economy is gathering speed, with small business borrowing rising to its highest on record and construction spending making its largest gain in 5-months.

Soft oil prices are having a positive impact on the US economy and would only temporarily dampen inflation, according to comments made overnight by to US Fed officials. European Central Bank and Bank of Japan continues to grapple with deflation threats.

GBPUSD fell to 15-month lows are recent construction data added to doubts over the strength of the UK economic recovery.

The Reserve Bank of Australia maintained their Cash Rate at 2.50% and reiterated the AUD was too high. Many market commentators are now expecting the RBA to cut interest rates during 2015.

Global equity markets were mostly higher on the day – Dow +0.5%, Nikkei +0.4%, Shanghai +3.7%, FTSE+1.3%, DAX -0.3%

Gold prices declined to USD$1,198. Oil prices fell by 1.7% on the day.

The current indicative mid-rates are:

NZDUSD           0.7800
NZDEUR           0.6300
NZDGBP           0.4985
NZDJPY            93.00
NZDAUD           0.9235
NZDCAD           0.8900

There is no data on the domestic calendar today.

Australian GDP figures hit the tapes at 1:30pm.

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »

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