By Dan Bell
The NZD/USD opens around 0.80 this morning-up over 150 basis points from Friday’s lows as EU Summit comments support risk markets across the board.
European officials announced they will use their rescue funds to inject aid directly into stricken banks from next year and intervene in bond markets as needed.
They also pledged to create a single banking supervisor for euro zone banks based around the European Central Bank in a landmark step towards a European banking union. European Stability Mechanism will be allowed to recapitalise banks directly.
Italian 10-year yields were 38 basis points lower at 5.81%with the Spanish equivalent down 57 bps at 6.34%.
Global risk assets surged with most European bourses up 4-5%. The US S&P 500 was up 2.49%. Oil prices were up 9.36% - the 4th biggest one day gain on record. Copper was up 4% and Gold up 3% which has the CRB Commodities Index up 4.55%.
While sentiment has clearly improved, it will be interesting to see the details of the EU plans and how easily they are to execute. If recent history is anything to go by it isn’t going to happen overnight.
The NZD opens at current indicative interbank rates- 0.78 AUD, 0.6310 EUR, 0.5095 GBP, 63.80 JPY.
Not much to report on the local front today. This week the focus will be on a number of central bank announcements with the RBA tomorrow and the BoE and ECB on Thursday. From the US we get their Employment Report on Friday night which is always a big focus.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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