By Dan Bell
The NZD/USD opens at 0.7705 after rallying strongly. The NZD got the initial impetus after the release of the exceptionally strong Q1 Australian GDP numbers (up +1.3% versus consensus of +0.6% , and then got a further boost when the ECB (European Central Bank) left both the interest rates and the outlook for economic growth unchanged.
The NZD/USD was also aided by short-covering as the speculative accounts who had previously sold NZD rushed to buy back their shorts as the rally advanced.
Hopes the EU will mount a rescue for Spain’s debt-stricken banks, and speculation of further monetary easing in the US (due to recent weak economic data) sparked a ‘risk on’ environment. The markets seemingly ignored the negative news that seven German and three Austrian banks were downgraded by Moodys, and that Cyprus could not rule out an EU bail-out (its banking sector is heavily exposed to Greece).
The US S&P500 index is 2.3% higher, and Dow Jones up 2.4% on the day, while the European & UK bourse closed up significantly as well.
The 19-commodity CRB Commodity Index is up 1.25% on the day. Oil prices rallied, gold prices jumped a high of USD$1640 per ounce before retreating to USD$1618. Copper rose for the first time in 5 sessions, while other base metal prices were higher across the board.
The NZD opens at 0.7705 USD, 0.7765 AUD, 0.6125 EUR, 0.4975 GBP, & 61.05 JPY.
There is nothing scheduled on the NZ data calendar for the remainder of this week. However, the volatile Australian employment data hits the tapes at 1.30pm today – this will give the markets something to trade off. Good numbers here will cause the NZD to rally further.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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