By Dan Bell
The NZD/USD opens around 0.7850/0.7870 after another bearish night with most risk assets under pressure.
With risk aversion firmly in play the US Dollar benefited from safe haven flows which pushed the 10 Year US treasury yield to all time lows at 1.39%. Yep - that’s a return of 1.39% p.a. for 10 Years.
Global stock markets are down across the board with the S&P 500 off 0.9%.
Moody’s reduced Germany, The Netherlands and Luxembourg sovereign outlooks to negative from stable. Shouldn’t really be a surprise given the current economic climate in Europe.
A manufacturing report from the US–Richmond Fed Factory Index’ dropped to its lowest level since April 2009 on continued signs the US economic recovery is stalling.
The NZD is weaker against the major crosses and opens at 0.7670 AUD, 0.5070 GBP, 61.35 JPY, 0.6520 EUR.
From NZ we get Trade Balance numbers today - will probably be largely ignored by market participants given focus on offshore developments but worth a look. From Australia we get CPI figures at 1:30pm.
Event Calendar: 25 July: NZ trade balance; AU CPI; EU German IFO; UK Q2 GDP; US new home sales; 26 July: NZ RBNZ OCR review; NZ finance minister speaking; US durable goods orders; US jobless claims; US pending home sales; 27 July: EU German CPI; US Q2 GDP; US Michigan consumer confidence.
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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
With risk aversion firmly in play the US Dollar benefited from safe haven flows which pushed the 10 Year US treasury yield to all time lows at 1.39%. Yep - that’s a return of 1.39% p.a. for 10 Years.
An oxymoron if ever there was one.
Buying T10 in size with such a high value BPV (DV01) is an extremely high risk trade, but nonetheless profitable. But a yield reversal would be as expensive as any living trader has had to contend with. Risk managers of size long duration Treasury books will be on high alert, especially the Federal Reserve.
A chilly northern summer reminder - don't ever try this at home. In any event seek prior advice of professionals.
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