By Dan Bell
The NZD/USD has had a relatively quiet night and managed to consolidate recent gains around 0.78.We open around 0.7790 after making a high of 0.7835 and a low of 0.7752.
Global stock markets firmed on news that French President Sarkozy and German Chancellor Merkel agreed on a plan to create more fiscal discipline across the region. The proposal would see automatic penalties for governments that fail to keep their deficits under control- further details to be announced at the EU Summit on Friday.
Sentiment also got a boost after Italy unveiled a 30-billion-euro package of austerity measures which has seen Italian bond yields drop further.
European equities finished marginally higher with the FTSE +0.28%, DAX +0.42% while in the US markets still have 90 min before they close with the Dow +0.81%. Commodities have had a mixed night with the CR Index -0.2%.
In the last hour a news report that credit rating agency S&P has warned six triple A-rated euro-zone members (Germany, France, the Netherlands, Austria, Finland, and Luxembourg) they may suffer ratings downgrades as a result of the deepening sovereign-debt crisis has seen sentiment take a hit. At this stage S&P have declined to comment on the story.
The AUD/USD followed offshore sentiment and made a high of 1.03 but opens back around 1.0255 following the S&P news.
The NZD opens at familiar levels against the major crosses at 0.7590 AUD, 0.5810 EUR, 0.4970 GBP and 60.50 JPY.
Not much to report on the local front today. The focus will be on the Reserve Bank of Australia cash rate announcement at 4:30 NZT where market pricing is expecting them to cut although economists see it a 50/50 call.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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