Major currencies traded within relatively contained ranges, as broader markets largely ignored the unpromising signs emerging from Greece’s negotiations. AUD outperformed, as broader markets largely ignored the unpromising signs emerging from Greece’s negotiations. AUD outperformed, while the USD edged lower on soft economic data.
EUR/USD has more than recovered its Monday morning slide, which came after staff-level talks between Greece and its creditors collapsed. There is a widespread belief that the odds of a deal emerging at Thursday’s Eurogroup meeting between finance ministers are very slim.
The IMF yesterday took the unusual step of airing (in a blog post) criticism of both Greece and its European creditors.
Olivier Blanchard, the Fund’s chief economist, noted that Greece will have to be willing to negotiate on its red lines (most notably, pensions). But he also urged that Greece’s euro-zone peers put the country back on a sustainable debt path, by writing off at least some of the debt owed to them. Germany has refused to even humour the prospect of debt relief.
Elsewhere, the AUD tops the G10 leader-board, finding some support despite the RBA’s Kent affirming that the door remains open to policy easing.
In a speech yesterday, Kent explored the effectiveness of recent rate cuts (or the lack thereof). This is consistent with the concern expressed by Governor Stevens, that rate cuts are not having as stimulatory an impact as they have had previously. Our NAB colleagues believe that the hurdle for a further rate cut in this cycle remains quite high.
NZD drifted higher in sympathy with the AUD, but the focus centred on the NZD/AUD cross. Having failed at an early-session attempt at 0.90, the cross finally traded to the level this morning.
There is a significant area of support between here and the 2014-low of 0.8850. We expect the cross will struggle to break below that in the near-term, unless the market starts to fully price in the prospect of a third RBNZ rate cut. We forecast the cross to finish 2015 at 0.92.
Today, the RBA’s Debelle speech to a financial markets audience seems likelier to provide fresh information, as opposed to the RBA minutes, which have been overshadowed by speeches from Stevens and Kent in the past week.
The dairy auction overnight will closely-watched, given that the RBNZ’s policy easing is partly driven by concerns around the income loss on the agricultural sector.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
Raiko Shareef is on the BNZ Research team. All its research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.