By Dan Bell
The NZD/USD gapped higher to open at 0.7770 this morning, having closed Friday night (New York time) at 0.7696.
News out over the weekend that Spain would become the fourth and largest eurozone economy to ask for a bailout. The loan, of up to EUR 100 billion from the EU rescue funds, would only be used to shore up its teetering banks which has been hit hard by its exposure to the very weak Spanish property market. This news was greeted favourably and risk is ‘back on’ at least for the moment.
The EUR/USD has rallied to a 2 ½ week high on the Spanish bank bailout news.
US President Obama emphasised the Eurozone’s ‘urgent need to act’ to protect the EU from recession, and reduce the chance of negative global fallout.
In other news: US trade deficit narrowed, and wholesale inventories rose in April. Chinese retail sales and industrial production both increased in May. Greek energy companies need further emergency loans to avoid power and gas shortages during their crucial summer tourist season.
The US S&P500 index closed 0.8% higher, and Dow Jones up 0.75% on the day, while the European & UK bourse were mixed..
The 19-commodity CRB Commodity Index fell 0.4% Friday. Oil prices dropped, gold prices rose slightly to USD$1593, although they did spike as high as USD$1640 at one stage. Copper fell to USD$7,235 a tonne on fears of slower global growth, and most base metals followed suit, which the exception of nickel.
The NZD opens at 0.7770 USD, 0.7755 AUD, 0.6145 EUR, 0.5010 GBP, & 61.80 JPY.
NZ Manufacturing data will be released at 10.45am today, with nothing from Australia.
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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
The re-cap. of the Spanish Banks is no panacea . The Spanish banks cannot service their debts ( Interest bill) and are going to have to repay these loans at some point . Now eveyone knows they are shonky , and no one will put their savings in there
Instead they should , like the US did , recognize that they funded and added air to a humungous property balloon , and that banks will , like in the US , have to fail.
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