By Dan Bell
The NZD/USD opens at 0.7550 this morning after hitting a high of 0.76 and a low of 0.7520 overnight.
Global stock markets have had a mixed and choppy night. The US market finished in positive territory with the S&P 500 up 0.61%. Commodities managed small gains overnight with the CRB Index up 0.14% with Oil prices up 0.32%, Gold +0.37%.
The RBA cut rates by 25bps yesterday which was widely expected. The AUD/USD rallied after the announcement to make a high of 0.98 as some had been expecting a 50bps cut-momentum quickly faded as most expect further rate cuts over coming months.
Finance ministers from the Group of Seven major economies discussed progress toward financial and fiscal union in Europe after an emergency call but made no joint statement.
As the European debt crisis rumbles on it is becoming increasingly likely that Spain will require a bailout.
The treasury minister of Spain said high borrowing costs meant credit markets were effectively closing to his country, and he made an appeal to the European Union to help them recapitalize its debt-laden banks.
The premium investors demand to hold Spanish 10-year debt rather than safe haven German bonds hit a euro era high of 548 basis points on Friday on concerns that it will eventually be forced to seek a Greek-style bailout.
A third round of Quantitative Easing from the US Central Bank has become more likely given the much weaker than expected US jobs number last week. Some analysts are suggesting an announcement could be made as early as the Fed’s June 19/20 meeting. If there is something that could change the recent decline in the NZD and strength in the US Dollar it is another round of good ole money printing. Watch this space!
Fonterra’s milk auction last night saw average prices up a whopping 13.5%. This comes after months of consecutive declines. Wholesale milk powder prices are still down approx 26% on an annualised basis.
The NZD opens at 0.7760 AUD, 0.6070 EUR, 0.4910 GBP and 59.50 JPY.
Not much to report from NZ today. From Australia we get Q1 GDP data at 1:30pm and tonight the focus will be on the ECB - will they cut rates and add further liquidity measures?
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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