By Dan Bell
The NZD/USD opens at 0.8095 this morning in volatile overnight trading. The NZDUSD hit a 3-month high of 0.8170 just after the European Central Bank (ECB) rate announcement, only to drop straight back down shortly there after to a 0.8070 low.
The global financial markets were hoping for immediate action from the ECB to push down borrowing costs, but were left disappointed in spite of the recent comments from ECB’s Draghi that they would “do whatever it takes” to preserve the euro. As one analyst put it “investors were looking for a bazooka and what they got was a pea-shooter instead.”
The ECB stated that they will draw up plans in the coming weeks on how they will intervene in the sovereign bond markets however – this was rather underwhelming and resulted in the EUR/USD, equity & commodity prices all suffering losses. The NZD/USD came off the sharply from the highs, but has managed to stay within its recent ranges.
In related news – Italy’s prime minister said his country will not seek a bailout, while Spanish Premier dodged questions about whether his nation will tap into European risk funds. However, both nation’s 10-year bond yields surged higher by nearly 0.50%.
The Bank of England, after their interest rate setting meeting, left interest rates unchanged at 0.50% and maintained its bond buying program.
The US S&P500 index closed 0.75% lower, and Dow Jones down 0.70% on the day, while the European & UK bourse also lost ground.
The 19-commodity CRB Commodity Index was plummeted 1.6%. Oil prices rose slightly, while Gold fell to a 1-week low of USD$1585 per ounce. Copper suffered its largest loss in 6-weeks to settle at USD$7240 a tonne, and other base metals fell between 0.5-2.2%.
The NZD opens at 0.08095 USD, 0.7735 AUD, 0.6645 EUR, 0.5220 GBP, & 63.35 JPY.
There is no domestic data scheduled today. The closely watched US non-farm payroll employment data hits the tapes tonight.
Congratulations to Nathan Cohen & Joseph Sullivan for winning NZ’s first Gold Medal in the double sculls. Hopefully we will see a repeat of their feat into tonight's other rowing finals. Have a great weekend.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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