By Alex Hilll
NZDUSD rallied higher overnight as risk appetite rose once again, hitting a high of 0.8465.
Strong US consumer spending data reduced fears of another US recession, coupled with news of a merger between the 2nd and 3rd largest banks in Greece, spiked a surged in equity markets and other 'risk' assets such as the NZD.
US consumer spending makes up around 70% of US economic activity, so the good data release improves the US's economic outlook somewhat. However, this is tempered by weak pending US house sales figures also released overnight.
The US Fed may still announced the 3rd round of quantitative easing/stimulus package (i.e.in essence printing USD) in the coming weeks if economic data does not continue to improve.
Gold price fell 2.2% to USD$1,787 an ounce, copper price dropped circa 2.9%, while oil rose for a fifth straight session.
US equity markets rallied strongly - the Dow is currently up 2.3% and the S&P 500 is 2.6% higher on the day. The Greek banking merger news (done to shore up their balance sheets) sparked a 14% rally in Greek equities, however Greek credit spreads remain at their extremely wide levels.
NZ Building Consents will be released at 10.45am today. US Fed meeting minutes will be released tonight.
Current indicative levels are: NZDUSD 0.8450, NZDAUD 0.7940, NZDEUR 0.5825, NZDGBP 0.5150, and NZDJPY 64.95.
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Alex Hill is a currency strategist at HiFX in Auckland. You can contact him here
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