By Dan Bell
The NZD/USD opens at 0.8015 this morning, with an overnight high of 0.8032, having surged from higher after the ECB bond buying announcement.
Risk is ‘back on’, at least for the moment, as the European Central Bank (ECB) announced a program of unlimited bond purchases, called OMT (Outright Monetary Transactions), in an effort to rein in the EU’s spiralling sovereign debt crisis. The EUR/USD, NZD/USD, equities, & Gold all rallied sharply in response.
The OMT is designed to drive interest rates lower in the euro area and fight speculation of the euro currency disintegration. Spanish & Italian debt yields dropped to their lowest level in 8-weeks post the OMT announcement.
However, not everyone is pleased with the ECB decision as German Finance Minister has said the euro zone must avoid using monetary policy to tackle its fiscal problems.
Australian employment data disappointed yesterday, with job creation lower and unemployment rate higher than expected.
Bank of England maintained interest rates at 0.50% and did not increase its ‘quantitative easing’ program.
US private sector added more workers than expected in August, according to the ADI survey, and US manufacturing data also exceeded consensus, adding to the view the US economy is recovering. However, tonight influential non-farm payrolls will give a clearer indication and will be closely monitored by the US Federal Reserve.
Global equity markets roared higher. The US S&P index surged 2.0% while the European markets leaped between 2.9% & 3.4%. The Shanghai Composite Index (SSEC) climbed 0.7%.
Oil prices pushed a little higher, while Gold rose to 6-month highs, peaking at USD$1713. Copper prices dropped to USD$7,700 a tonne, and other base metals prices were mixed.
The NZD opens at 0.8015 USD, 0.7795 AUD, 0.6345 EUR, 0.5030 GBP, & 6.20 JPY.
No data on the domestic calendar today. Australian Trade Balance figure hit the tapes at 1.30pm.
All eyes tonight will be on the US non-farm payroll employment numbers. The US Federal Reserve has stated if the unemployment rate stays high (currently at 8.3%), then they will conduct another round of monetary stimulus.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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