By Dan Bell
The NZD/USD opens at 0.8195, having hit a 14-week high of 0.8222 overnight.
The NZD/USD followed the EUR/USD higher on expectations the European Central Bank (ECB) will take action to lower borrowing costs in Spain and Italy.
Global investors are now less pessimistic about the euro-zone debt crisis and are now more willing to purchase so-called ‘risky assets’ such as equities, commodities, and the NZD.
Italian Prime Minister Monti warned of a potential political breakup of Europe without greater urgency to lower government borrowing costs. This negative news was countered by the German government stating they support the ECB’s bond-buying program which helps to drive interest rates lower.
In other news – international lender assessing Cyprus’s bailout needs for the economy to be in a “worse state than expected” and in need of painful adjustment the coming months. UK house prices fell in July which highlights the fragility of the UK economy and is continuing to weigh on the GBP.
The US S&P500 index closed 0.25% higher, and Dow Jones up 0.20% on the day, while the European & UK bourse also rose by similar percentages.
The 19-commodity CRB Commodity Index was gained 0.35%. Oil prices edged slightly higher, while Gold rose 0.5% to USD$1610 per ounce. Copper gained to USD$7495 a tonne, and other base metal prices were generally firmer.
The NZD opens at 0.8195 USD, 0.7755 AUD, 0.6610 EUR, 0.5250 GBP, & 64.10 JPY.
NZ Labour Cost index will be released at 10.45am today, while RBA has a Cash Rate decision at 4.30pm – no change expected.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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