By Dan Bell
The NZD/USD opens at 0.7555 this morning after trading to a high of 0.7595 overnight and a low of 0.7460 over the weekend.
The key news on Friday night was the extremely poor US employment report which showed jobs growth of only 69k new jobs in May versus expectations of 150k.
Risk was sold off across the board in response and the US dollar firmed. This was quickly reversed as market participants considered the potential for another round of quantitative easing given a stalling US economy - which is negative for the USD and provided support to the Kiwi.
European debt issues continue to be front and centre. Finance ministers and central bank governors of the Group of Seven leading economies will hold a conference call tonight to discuss the European debt crisis.
The EUR/USD has recovered from recent lows buoyed by news that France and the European Commission signalled their support for an ambitious plan to use the euro zone's permanent bailout fund to rescue stricken banks.
The NZD has been stronger against most major cross rates over the last few days and we open at 0.7770 AUD, 0.6053 EUR, 0.4915 GBP and 59.20 JPY.
The focus today will be on the RBA interest rate announcement at 4:30pm NZT. The market is fully pricing in at least a 25bps rate cut with some commentators calling for a 50bps cut.
Nothing to report from NZ today. Tomorrow morning we get Fonterra Dairy Auction results.
On Wednesday night the European Central Bank announces monetary policy. Some market participants are calling for additional liquidity measures to offset growing risks in Europe.
The Federal Reserve Chairman Ben Bernanke has his semi-annual testimony to congress on Thursday. Any suggestion of QE3 will be see the USD under pressure.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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1 Comments
..... my take on it is a 25 basis points cut today , Dan . If the RBA went for .5 % again , that'd look like panic on their part , and it'd undo the effect of the cut by spooking the market ..
General consensus is that the RBA has been behind the 8-ball , way too slow off the mark in recognizing the need to cut rates ....
.... those of us who do live a street level understand fully that the Australian economy is struggling ..
Given that the big banks have most of their funding in place , there's no excuse for them not to pass on the full cut to customers this time .
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