By Dan Bell
The NZD/USD opens at 0.7865 this morning, having plunged over 140 points from Thursday’s highs, as high-yielding assets lost some of their recent allure after a series of weak global data suggests that global growth is slowing.
The weak Chinese PMI (Purchasing Managers Index) starting the rot, followed by the release of the Euro-zone business activity which contracted for the 5th straight month. The Philly Fed reported manufacturing activity contracted at a faster pace in June added to the view that global growth is slowing – this has weighed heavily on growth-sensitive currencies such as the NZD and other so-called ‘risky assets’.
Adding to the negative sentiment is news that the Moody’s credit rating agency may downgrade the rating of as many as 17 global banks and securities firms.
In other news, Spain sold EUR 2.2 billion of Govt bonds overnight, however their borrowing costs rose sharply. Greece’s new government promised to renegotiate the terms of the country's bailout without endangering its future in the euro, trying to ease social tensions but this will not go down well with the euro-zone power brokers. In slightly more positive news, US house prices rose 0.8% from March to April.
The US S&P500 index closed 2.2% lower, and Dow Jones down 2.0% on the day, while the European & UK bourse also lost ground.
The 19-commodity CRB Commodity Index was plummeted 2.1%. Oil prices slumped nearly 4% on the renewed fears of a global economic slowdown, while Gold prices dived 2.5%. Copper also dropped USD$200 a tonne to USD$7,341, and most other base metals fell between 1.5-2.5%.
The NZD opens at 0.78655 USD, 0.7835 AUD, 0.6270 EUR, 0.5045 GBP, & 63.10 JPY.
Visitor arrivals and Credit Card spending are on the domestic calendar today. However the euro-zone and the strength (or lack there of) of global growth will continue to drive financial market sentiment.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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2 Comments
The foreign exchange markets have become like this small truck I saw racing down a Hong Kong street like his life depended on it. There is so much money sloshing around in the back that the slightest change in direction or even a small bump in the road - and the waters flying out over the edges.
Ha...! good visual , like it Ralphie..!
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