By Dan Bell
The NZD/USD is lower this morning and opens under 0.7800 tracking offshore risk sentiment which has turned negative again on continued European debt concerns.
The USD is stronger across the board on safe haven flows which has the AUD/USD under 1.02 and the EUR/USD in the low 1.36’s.
German Chancellor Angela Merkel said on Monday that Europe could be ‘living through its toughest hour since World War Two’- not sure if this statement is going to inspire investors to buy more European bonds!
The ECB has been buying troubled euro zone governments' bonds to stabilise markets. But figures released on Monday showed it halved its weekly bond buy at the height of the Italian government crisis last week, suggesting it is no longer willing to be the lender of last resort.
Greece and Italy might have new leaders but not a lot has changed. In Greece, new Prime Minister Lucas Papademos, will have to win Wednesday's confidence vote in his cabinet before meeting euro zone finance ministers in Brussels on Thursday and new Italian leader Mario Monti faces ongoing pressure on Government bond yields as Italy seeks to raise more money from the market.
Euro zone industrial dropped 2% in September pointed to a sharp contraction towards the end of the year.
Wall Street is lower this morning with the S&P500 down 1% with another 90 mins of trading to go. Commodity prices are generally weaker across the board with the CRB Index down 0.58%.
The NZD is marginally weaker against the major cross rates despite the much stronger than expected Q3 Retail Sales number yesterday and opens at current indicative levels -0.7630 AUD, 0.57 EUR, 0.49 GBP, 59.90 JPY.
Nothing to report on the local front today. From Australia we get RBA Monetary Policy Meeting Minutes at 1:30 NZT.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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