By Dan Bell
The NZD/USD traded down to 0.8149 yesterday evening before turning tail and rallying to a high of 0.8230 – spurred on by an improving global economic outlook which encouraged a ‘risk on’ environment. The NZD/USD currently trades around 0.8215.
Positive results from a Spanish government bill (short term debt) auction and upbeat German investor sentiment sparked a rally in risky assets such as global equities, commodities, and the NZD. Gold prices ended little changed, although it did trade in USD$U25 range the pas 24 hours.
Prices fell by an average of 9.9% overnight at Fonterra’s latest global auction, and have fallen around 30% since peaking out in March 2011. Hence, it is certainly still not all plain sailing for the NZD.
Spain will remain in the headlines and there is another Spanish auction scheduled for Thursday, but this time it is for 10 year bonds – a much more influential tenor than short term bills. This will be watched with interest.
Spanish banks remain essentially excluded from wholesale credit markets. Hence, they have been borrowing with gusto from the European Central Bank (ECB) – in fact, they borrowed a record EUR316.3 billion in March, which is nearly double February’s amount.
All is far from rosy in Spain, and if Spanish property markets falls by more than the current 20% drop, then the Spanish banks will be under enormous pressure as will their national economy.
The 19-commodity CRB Commodity Index rose by 0.4% on the day. Oil prices nudged higher, gold prices were flat at USD$1650 per ounce, and copper prices rebounded from a 3-month low to trade above USD$8,000 a tonne.
Equity markets are stronger across the board overnight. The US S&P500 currently up 1.6%, while the Dow Jones Index is 1.5% higher on the day.
The NZD opens at 0.8215 USD, 0.7900 AUD, 0.6255 EUR, 0.5155 GBP, & 66.40 JPY.
There is no data on the domestic calendar today. NZ CPI will hit the tapes Thursday.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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