By Dan Bell
The NZD/USD had a very volatile night - after trading to a low of 0.8258 yesterday afternoon we rallied to a high of 0.8387 early last night after the SNB intervened to weaken the Swiss Franc but have come under pressure this morning as risk aversion weighs to make a low around 0.8200.
The big news overnight was the Swiss National Bank (SNB) announcing a minimum rate for the EUR/CHF of 1.20. The EUR/CHF was sitting at 1.1200 at the time of the announcement and within 10 minutes had risen about 8% to a high just above 1.2150. The Swiss Franc has been trading at all time highs against a range of currencies due to its safe haven appeal which has been putting pressure on their economy.
US stock markets opened significantly weaker but managed to find support after better than expected ISM Non Manufacturing Data with the Dow Jones finishing down 0.9% on the day.
Commodity prices are weaker across the board with the CRB Index down 0.84%.
Fonterra dairy auction results came in weaker this morning falling 1.4%. Average prices are now down approx 7.7% from 12 months ago.
Sovereign debt concerns in Europe continue with the focus on Italy at the moment as their government scrambles to put together a viable austerity plan. The EUR/USD has dropped through key support at 1.40 this morning to make a low of 1.3971.
Further weakness in the EUR may see the US Dollar continue to strengthen across the board which would see further weakness in the NZD/USD.
The RBA left interest rates on hold yesterday and their statement suggested rates are more likely to remain on hold in the near future- which is at odds with market pricing which is still expecting almost 100 basis points of rate cuts in the next 12 months.
The NZD is broadly weaker against most major currencies and opens around the following levels 0.7825 AUD, 0.5860 EUR, 63.80 JPY, 0.5150 GBP.
Nothing on the local front today but from Australia we get Q2 GDP figures which are expected to come in at +1%.
-------------
Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.