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German's threatening to stop financial aid for Greece

Currencies
German's threatening to stop financial aid for Greece

by Kymberly Martin

NZD

The NZD continued its ignoble slide over the past 24-hours as global risk appetite remains under pressure. The NZD/USD currently trades around 0.7850.

Yesterday’ release of the RBNZ Financial Stability Report did little to impact the NZD. Rather, the NZD’s prospects at present appear to be at the whim of global risk appetite.

This came under further pressure overnight as no resolution is seen in the Greek election standoff, and concerns about Spain’s banking system also bubble. The NZD/USD, along with its risk sensitive peers, slipped from 0.7880 last evening to trade around 0.7840 currently. Intra-night it traded below 0.7820.

On the crosses, NZD trading was choppy and bound within relatively tight ranges overnight.  The NZD/AUD bobbed sideways along the 0.7800 level. The NZD/EUR paddled around the 0.6060 level.

The NZD/GBP traded in a 0.4855 to 0.4880 range overnight, trading close to the bottom of this range, at present. This cross has now fallen 8.5% from its February highs.

The prospects for the NZD/GBP tonight will be impacted by the Bank of England meeting. Although the Bank is expected to hold rates at 0.50% there is some possibility of further Asset Purchases (QE). This is not priced by the market, and if delivered, it would likely result in some support for the NZD/GBP.

Today, the NZ PMI will be released. The market will be watching to see if it can sustain its recent strength, which is at odds to some of its other developed market peers.

Global risk appetite will also remain the key driver of the NZD. The next key support level for the NZD/USD is sighted around 0.7780.

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Majors

As risk appetite slipped further the USD and JPY were both in demand as “safe haven” currencies. The USD index currently trades around 80.30.

Our risk appetite indicator (scale 0-100%) has slipped a little further to just below 55%. The Euro Stoxx 50 fell a further 0.47% (German DAX up 0.47%, Spanish IBEX 35 down 2.77%), and the S&P500 is currently down 0.50%.

Currency markets have once again become a game of watching European headlines.

The USD was favoured over the EUR overnight as uncertainty reigns given the political stalemate in Greece. In addition, worries are swirling regarding the outlook for the Spanish banking system.

The USD took a step up on headlines from the German financial minister that “if Greece ends its reform then no more aid tranches will be paid out”.

Greece’s continued existence in the Eurozone is now also being openly discussed. The EUR dropped from just below 1.3000 last evening to trade around 1.2950 currently.

In this backdrop of uncertainty, the JPY was also favoured as a “safe haven” currency. The USD/JPY slipped from 79.90 to below 79.50 last evening, before returning to trade around 79.70 currently. The USD/JPY is now sitting close to its lows since late February.

In the backdrop of weakened risk appetite the Antipodean currencies continued their slide. The AUD/USD traded as low as 1.0020 before returning to trade at 1.0060 this morning. It hasn’t traded at these levels since last December.

The key for the AUD today will be the AU employment report. Along with consensus, our NAB colleagues look for no growth in employment and a 0.1% rise in the unemployment rate to 5.3%.

Given the market’s current tarnished view of the AUD a worse than expected outcome would likely solicit the greater AUD response.

Tonight, focus will remain on European politics today. The ECB also publishes its May monthly report. The Bank of England announces rates today. It is expected to keep rates on hold. The focus will be on its QE policy.  Its ability to implement further QE is somewhat constrained by its medium-term inflation projections, as inflation to date has remained stubbornly high.

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2 Comments

"Ignoble slide" it says above.  Ignoble  ????   Why not say "happy slide"  or "fortunate trend"

The langauge is all wrong.  We do want a lower NZ dollar ( well lots of us do ) Thats a good thing.

Why then do we use such bad words when what we want happens. 

And please don't say it "weaken"s.  Say maybe it "gets better"

Up
0

"Ignoble slide" it says above.  Ignoble  ????   Why not say "happy slide"  or "fortunate trend"

The langauge is all wrong.  We do want a lower NZ dollar ( well lots of us do ) Thats a good thing.

Why then do we use such bad words when what we want happens. 

And please don't say it "weaken"s.  Say maybe it "gets better"

Up
0