Bernard Hickey talks with HiFX Senior Dealer Dan Bell about the week's currencies and markets action in their 'Never a Dull Moment' report, including news this week from the European Central Bank (ECB) that it is still opposed to mass money printing to buy European bonds.
Speaking on the eve of a summit of European leaders in Brussels, Bell pointed to the market's disappointment over the reluctance of the ECB to take massive action to solve the European crisis.
"Everyone realises they (the European leaders) can't really do enough unless the ECB are also going to be participating," he said.
After Bell spoke, the summit concluded nearly 12 hours of talks with a plan for 23 European countries to form a 'fiscal compact' where rules on budget deficits and debt are agreed.
However, the proposal will not be seen in detail until March and the plan is not a full EU treaty change after Britain and Hungary opposed such changes. Instead, it will be a seperate Euro-area treaty.
Also the leaders agreed to lend €200 billion via their central banks to the International Monetary Fund for any bailouts for Italy and Spain. See more here at Bloomberg.
Bell pointed to the extreme volatility in currencies at the moment, driven by headlines from Europe and waning liquidity as the market heads towards Christmas.
"We are moving into this December liquidity where it can get quite choppy as a lot of investors take their money off the table," he said, pointing to potential volatility in coming weeks.
RBA rate cut
Bell pointed to the Reserve Bank of Australia's second official rate cut on Tuesday to 4.25% and that markets now expect another two rate cuts in the first half of 2012.
Employment growth in Australia has slowed to its lowest level since 1996 with a two speed economy.
The New Zealand dollar was weak around 76 Australian cents, not far off its near 20 year lows of 72 cents after the Christchurch earthquake. It has also fallen against the Euro within a range of 56.5 euro cents to 58.5 euro cents and around 48.5 pence to 50.5 pence.
The currency fell below 77 USc after Bell spoke when the summit ended without a new EU treaty agreement.
Dan Bell is the Senior Dealer at HiFX, a UK-headquartered foreign exchange dealer with significant operations in Australia and New Zealand. It has a dealing room in Auckland. See more detail here.